Hi Traders. Today's topic is something uncommon, not the typical textbook materials, but definitely a setup that I enjoy taking it repeatedly and something you could consider. Let's begin with 'what is a breakout'? Eg. In an uptrend, an upward breakout of a key resistance simply means people are optimistic about the asset, and sellers who 'used to' defend the key resistance level quit or gave up. A violation of the range could drive the market strongly into either direction (momentum). The textbook entry would be above the breakout range, maybe a stop order above it with SL inside the range. This setup would tests your price action skill, by identifying the strength and potentiality beforehand. These are some of the criteria,
1. Higher lows sequence - The first sign of an uptrend is higher highs & lows, it simply means people are willing to pay more and get involved. When you spot a higher lows pushing against a resistance multiple times, try to read the story behind it. 2. Moving averages - MA is a momentum indicator that takes the arithmetic mean of a given set of prices over the specific period. In this specific example we need to see the MAs slope upwards showing us that the dynamic support is giving us an extra bit of force. 3. Build up - This is where you'll find an entry at bottom range of the build up, anticipating a breakout beforehand (Accumulation of buy orders).
Pros' - You are getting yourself prepared by identifying the momentum beforehand - More patient as your entry is early, it allows you to sit through the emotional rollercoaster if the market is just chopping around as you don't have to watch your P&L going red and green - Ideal risk-to-reward due to your early entry - It gives you time to re-assess the situation even if its a false breakout, because you're positioned beforehand - If the market is pulling back according to your plan, you could begin sizing up and get ready to ride the fresh momentum
Cons' - There will be time where market fails and reverse against you - You are going to miss out some opportunities during times where the market just rip through the highs - It requires experience
Hopefully this gives you a different perspective in your current breakout strategies, kindly do your own research. Trade safe.
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hi . amazing explanation and easy to learn . can i ask u smthing ? that's the same for break - down ?? :D
TraderNeoh
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@tzamal12397 Yes. It works the same for both upwards & downwards breakout.
terbo59
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i find this very helpful and easy to grasp compared to some others. I like this simple approach. What about volume? I suppose the volume increase substantiates the course to invest (or not)?
TraderNeoh
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@terbo59, Hi Terbo59, it depends on the situation, if bullish volume has increased nearby a key resistance, its a sign of strength. But if the bearish volume is increasing during the pullback despite the size of the candles, that's an alert sign.