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:

1. Trend Breakout – Price breaks a trendline or major key level and continues in the breakout direction.
2. Range Breakout – Price moves out of a sideways range, signaling a possible new trend.
3. 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.

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.

📌 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.