What is a Breakout?
A breakout occurs when price moves beyond a key level (support, resistance, or consolidation zone) with strong momentum. Traders look for breakouts because they signal potential strong trends.
Types of Breakouts:
- Trend Breakout – Price breaks a trendline or major key level and continues in the breakout direction.
- Range Breakout – Price moves out of a sideways range, signaling a possible new trend.
- False Breakout (Fakeout) – Price briefly breaks a level but returns inside the range, trapping traders.
How to Trade Breakouts on MT5
🔹 Step 1: Identify a Consolidation Zone
- Use the H1 or H4 timeframe to find sideways price movement (range).
- Mark the high and low of the range using horizontal lines.
🔹 Step 2: Wait for a Break & Retest
- Instead of entering immediately, wait for price to break and retest the level.
- Look for a confirmation candlestick (engulfing candle, rejection wick).
🔹 Step 3: Enter with a Stop-Loss & Take-Profit
- Entry: After a confirmed breakout & retest.
- Stop-Loss: Below/above the breakout level.
- Take-Profit: Measure the height of the range and project it in the breakout direction.
📌 Example:
- EUR/USD is ranging between 1.1000 and 1.1050.
- Price breaks above 1.1050, retests, and forms a bullish engulfing.
- Entry: Buy at 1.1060.
- SL: 1.1040 (-20 pips).
- TP: 1.1100 (+40 pips) → 1:2 RRR.
✅ Breakout trading works best during high-volatility sessions (London/New York).
Avoiding False Breakouts
Not all breakouts lead to trends. Some breakouts fail and trap traders in losing trades.
🔹 How to Avoid False Breakouts:
- Use higher timeframes (H1, H4, D1) to confirm levels.
- Wait for a retest before entering.
- Check volume – Strong breakouts often have larger candle bodies and momentum.
📌 Example:
- GBP/USD breaks below 1.3000 support, but the next candle closes back inside.
- This is a false breakout – Traders who entered short get trapped.
- Solution: Wait for confirmation before entering a trade.
Strategy 2: Session-Based Trading
Understanding Forex Market Sessions
The forex market operates in four major sessions, each with different trading conditions.
| Session | Open (UTC) | Close (UTC) | Characteristics |
| Sydney | 10:00 PM | 7:00 AM | Low volatility, slow trends |
| Tokyo (Asian Session) | 12:00 AM | 9:00 AM | Low volume, good for range trading |
| London Session | 8:00 AM | 5:00 PM | High volatility, strong trends start |
| New York Session | 1:00 PM | 10:00 PM | Strong moves, high USD impact |
Each session affects the volatility and liquidity of currency pairs.
Best Times to Trade Based on Sessions
🔹 London Session (8 AM – 12 PM UTC) → Best for breakout trading.
🔹 New York Session (1 PM – 5 PM UTC) → Best for high volatility trading.
🔹 Asian Session (12 AM – 6 AM UTC) → Best for range-bound scalping.
📌 Key Insight:
- EUR/USD, GBP/USD, and USD/JPY move the most during London & New York.
- AUD/USD and NZD/USD have better movement during the Sydney session.
How to Trade Based on Market Sessions
1. Trade Breakouts in High-Volume Sessions
- Look for breakouts during London & New York overlap (1 PM – 5 PM UTC).
- Expect strong moves and trend continuation in these hours.
📌 Example:
- GBP/USD consolidates overnight during the Asian session.
- At 8 AM UTC (London open), it breaks resistance at 1.3000.
- Strong buying enters → Trade breakout in the trend direction.
2. Avoid Trading During Dead Hours
- Between 7 PM – 10 PM UTC, the market slows down due to lack of liquidity.
- This leads to choppy price action and false breakouts.
- Focus on trading when major sessions overlap for better results.
📌 Example:
- You trade EUR/USD at 9 PM UTC, but price moves slowly with no direction.
- This happens because the London and New York sessions are closed.
- Solution: Trade during high-volume hours for better movement.
3. Matching Currency Pairs with Market Sessions
Different pairs are more active during certain sessions.
| Currency Pair | Best Session to Trade | Why? |
| EUR/USD | London & New York | High liquidity, strong trends |
| GBP/USD | London & New York | Strong moves, news-driven |
| USD/JPY | London & New York | Affected by USD news events |
| AUD/JPY | Asian Session | Best movement during Tokyo hours |
| NZD/USD | Sydney & Asian | Moves during NZ & AUS news |
📌 Key Tip: Trade EUR/USD, GBP/USD, and USD/JPY during London & New York for the best results.
Conclusion: What You Should Learn from This Lesson
✅ Breakout Trading – Trade price movements after consolidation for strong trends.
✅ Session-Based Trading – Match pairs to the best market session for movement.
✅ Avoiding False Breakouts – Wait for confirmation before entering trades.
✅ Choosing the Best Trading Times – Focus on London & New York for high-volume trades.
By applying these strategies, you can optimize your trades and improve your overall trading performance.