This is exactly why I didn’t trade the breakout in the EURUSD

Last Tuesday I told you I wasn’t going to trade any breakout in the EURUSD… Here Tuesday’s chart:

EURUSD Short term chart

I said that I was going to wait for my signal AFTER the breakout because it was trading at The SF Box.

Anyway, the EURUSD broke both sides of the range.

Here is the chart:

EURUSD Breakout

See those two red boxes? The EURUSD broke both sides of the range and on both of them the market came back to the range.

This is why it was a bad idea to trade the breakouts

First, as I said in my previous post, the kind of volatility we are seeing in the EURUSD isn’t that good at all. It’s kind of difficult to trade when the it is retracing from random levels, there is no way to know where to place your SL, or your TP order, or even when to open your trades.

So you need to be careful and only take trades that have the highest probability and the lowest risk.

Second, and most important. You never take breakout trades when the market is trading around an important long term level.

The EURUSD its trading right now around an important LT resistance level (see the daily chart below).

So when do you take breakout trades then?

I’ve found out that the breakout trades that have the highest probability are the ones hat you take them when the market is already in a clear market condition.

You see what I mean? If you have any question, don’t hesitate to leave a comment.

Where is the EURUSD heading?

Well, I’m no magician and I rather wait for the market to tell me the direction than guess. But here is the daily chart, take a look at the pattern it formed (red box):

EURUSD Daily Chart

Based on that pattern with downward pressure, which also was formed at an important level gives us a an idea direction it might take…. What do you think?

Your turn

Did you take the EURUSD breakout?

How do you determine when to take breakout trades?

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Raul Lopez

I've been trading the markets for more than 15 years. I believe the best way to trade is by adapting to the market conditions. You can learn it too, join our community .

  • Great Insight, Markets is quite erratic these days. Im happy i didnt take the trade too. Hey, Did u check the EUR/GBP Daily pair today? i placed a sell, though i still locked in profit .interestingly, the market went all the way up. Sometimes, situations like this, always get me thinking i shouldnt have placed the trade Initially. I’d like to hear your opinion bout this.

    • Raul Lopez

      Hey Tunde, dont know exactly the level at which you sent short… But right now I see some short potentials…

      Are you still short?

      Cheers,

  • Eviano

    I almost fell into the EURUSD breakout trap until I read you article and base on the confident I have developed in your analysis, I decided not to trade it. But I do not understand what you mean by SF Box.if you can explanation to me, I will appreciate it. thank you

    • Raul Lopez

      Hey Eviano, here is an article about the SF Box:

      http://www.protradingnow.com/2012/07/20/how-to-spot-false-breakouts-the-secret-is-this-simple-strategy-the-sf-box/

      I’m glad you didnt take the breakout!

      • Eviano

        please, can you look at the JPY carefully and see if there is a possibility of it getting stronger in the nearest future. Especially of the pairs where JPY is the counter. e.g. EURJPY. I am actually seeing a down tread in the nearest future if it open below LOPS2. Please, I need your observation

        • Raul Lopez

          Hello Eviano, Yes, I think the EURJPY will get stronger… It might retrace though to the 126.00 area, but there is plenty of upward pressure, we just need to be patient to find the right entry level.

          Good luck!