Hello traders. Having a trading plan is very important and you should always have a plan before you enter a trade. Here I explained 4 types of possible entries when breakout occurs.
You can see here example of a consolidation between support and resistance zones. Strong breakout occurs, and what to do now? Should we sell immediately after breakout? Maybe, but its usually very risky. Especially if you use narrow stop loss. So it is much better choice to wait for one of these 4 possible outcomes.
First and the best choice is to wait for a retest of a broken support. Maybe some nice candlestick pattern formation or pattern like double top.
Sometimes full retest will not occur, but its possible to see wick rejection. This is second option and it can be very useful in a volatile markets.
If a pullback is strong and price breaks previous support again, we can start asking questions is this a fake-out? It is hard to tell depending on a situation, but anyway, it is time to change our plan. What do to now?
Now we have third option, which is to wait for a retest of previously broken support and then look to enter a trade. So price returned to our consolidation zone, and now we wait for a retest.
Sometimes pullback will be very strong and go all the way through our consolation zone and break previous resistance (or support). In this case we can look to enter once the price retests this key zone/level.
This is the plan that I try to follow. You can adjust it, or change it as you wish, but the point is to have one (Entry Plan).
Have a great day!
You can see here example of a consolidation between support and resistance zones. Strong breakout occurs, and what to do now? Should we sell immediately after breakout? Maybe, but its usually very risky. Especially if you use narrow stop loss. So it is much better choice to wait for one of these 4 possible outcomes.
First and the best choice is to wait for a retest of a broken support. Maybe some nice candlestick pattern formation or pattern like double top.
Sometimes full retest will not occur, but its possible to see wick rejection. This is second option and it can be very useful in a volatile markets.
If a pullback is strong and price breaks previous support again, we can start asking questions is this a fake-out? It is hard to tell depending on a situation, but anyway, it is time to change our plan. What do to now?
Now we have third option, which is to wait for a retest of previously broken support and then look to enter a trade. So price returned to our consolidation zone, and now we wait for a retest.
Sometimes pullback will be very strong and go all the way through our consolation zone and break previous resistance (or support). In this case we can look to enter once the price retests this key zone/level.
This is the plan that I try to follow. You can adjust it, or change it as you wish, but the point is to have one (Entry Plan).
Have a great day!