A breakout is one of the most common trading strategies, yet if you are new to trading or have some experience trading breakouts, you may find that they're not as easy to trade as they appear. Often the breakout turns out to be false, losing you money. The breakout bounce trading strategy can reduce the number of false breakouts you lose on, saving you money, and still provide you with an affordable entry price.
A false breakout occurs when the price moves above resistance or below support but then quickly retreats back into the former range. Traders who made a trade thinking the breakout was real will lose money if this occurs. The breakout bounce trading strategy avoids this scenario. Instead of making a trade when the breakout occurs, you will wait for a pullback. If an upside breakout occurs, you will watch as the price moves higher, but won't make a trade until it begins to move lower again toward the original breakout price. How these pullbacks reacts will determine if you make a trade or not. By being patient and observant, you can determine if the breakout is real or fake.
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