Start Trading Now Get Started
Table of Contents
Affiliate Disclosure
Affiliate Disclosure DailyForex.com adheres to strict guidelines to preserve editorial integrity to help you make decisions with confidence. Some of the reviews and content we feature on this site are supported by affiliate partnerships from which this website may receive money. This may impact how, where and which companies / services we review and write about. Our team of experts work to continually re-evaluate the reviews and information we provide on all the top Forex / CFD brokerages featured here. Our research focuses heavily on the broker’s custody of client deposits and the breadth of its client offering. Safety is evaluated by quality and length of the broker's track record, plus the scope of regulatory standing. Major factors in determining the quality of a broker’s offer include the cost of trading, the range of instruments available to trade, and general ease of use regarding execution and market information.

Fading False Breakouts in Forex

By Adam Lemon

Adam Lemon began his role at DailyForex in 2013 when he was brought in as an in-house Chief Analyst. Adam trades Forex, stocks and other instruments in his own account. Adam believes that it is very possible for retail traders/investors to secure a positive return over time provided they limit their risks, follow trends, and persevere through short-term losing streaks – provided only reputable brokerages are used. He has previously worked within financial markets over a 12-year period, including 6 years with Merrill Lynch.

ForexEvery now and again I look through Forex trading strategies which are getting discussed on various internet forums. Typically, most of the strategies are promoted by traders who are knew and don’t yet understand the flaws in what they are saying. For example, it always made me sad to see someone push a trading strategy with a lot of custom indicators whose formulae they don’t know let alone understand and end with the comment “works only on USDJPY and has given great returns for the last three months”. This is someone who is going to lose a lot or even all their account quite soon if they keep doing down that same path. Three months is no time at all over which to judge a trading strategy. If the strategy is robust, why would it only work with one pair such as the USD/JPY?

One a few occasions though I can find a simple and potentially strong concept being presented and discussed for use throughout Forex, without any indicators or overly complex rules. These are likely to be better approaches to investigate and to get involved in than overelaborate, multiple indicator trading systems.

An example of one of the better robust concepts in Forex is the false breakout reversal, which can also be a double top / double bottom strategy. These are also known as “2B breakouts”. The basic concept is this: there is a swing low or high, the price returns to it and briefly exceeds it before reversing strongly. If you look at Forex charts, you will notice that key lows or highs are often briefly exceeded before a reversal takes off.

One reason this approach can work well in Forex is that the price usually spends a lot of time ranging, rejecting highs and lows, often seeming to breakout but then to go and quickly reverse. Hopefully over the coming days I will be able to publish the results of some tests of this concept on historical Forex prices.

Adam Lemon
About Adam Lemon

Adam Lemon began his role at DailyForex in 2013 when he was brought in as an in-house Chief Analyst. Adam trades Forex, stocks and other instruments in his own account. Adam believes that it is very possible for retail traders/investors to secure a positive return over time provided they limit their risks, follow trends, and persevere through short-term losing streaks – provided only reputable brokerages are used. He has previously worked within financial markets over a 12-year period, including 6 years with Merrill Lynch.

 

Most Visited Forex Broker Reviews