Wednesday, April 8, 2009

AUD USD Range – Trade on breakout

aud usd hourly 8.4.09

AUD USD Hourly charts

The pair has formed this range over the last few days, and the appropriate way to trade this is to take a trade on breakout in either direction. So if we get an hourly close below this level then we go short with a stop 50-60 pips above the support line. Similarly, if we see a breakout above the resistance line then its appropriate to take long positions with stop 50 pips below the resistance line. Breakout trades are the trades which make one money regularly in the long run. Range based trades or small pops from support/resistance will in the long term result in losses because the average gains will be lower than average losses. We should aim for a minimum of 2:1 ratio between avg gain/avg loss, better if its near 3:1

A 2:1 ratio means that if  my win ratio is anything above 33% I will make money. For a 3:1 ratio, I  will make money if my win % is anything better than 25%. Most people struggle to achieve anything better than 50-60%, but 25% is easy to do.