Intro to My Strategy Trading BreakoutsA Simple explanation of my trading strategy using support and resistance zones for breakout trading. Enjoy
Breakout
Practical Exercise - The Flag PatternThe Flag Pattern is derived from the concept from Elliott Wave and a breakout technique.
Practical Exercise
1) Identify a corrective move that look like a Flag Pattern, it can be any currency pair, any timeframe.
2) Record down where does price move after the completion of the Flag Pattern, and how far it travelled.
3) Post your exercise on the comment section in the thread.
4) Repeat this practice to gather a total of 10 examples.
Example of a Symmetrical Triangle on ETHUSDETHUSD formed a symmetrical triangle. It has two trend lines. One uptrend line is acting as support while the downtrend line is acting as resistance.
Contains three highs lower and two lows higher. When these points are connected, the lines converge as they are extended and the symmetrical triangle takes shape.
The symmetrical triangle can be continuation or reversal, so we must wait for which line will break. To confirm the breakout, the price should close above the resistance line or below the support line. In this case broke by resistance, then we must make a long.
The profit target is the distance away as the back of the triangle.
Example of an Ascending TriangleGBPAUD formed an ascending triangle. We could see a horizontal upper line (that would be a resistance) and a lower uptrend line (that would be a support).
Prices moves with equal highs, and lows higher than previous.
Then after a few attempts, the prices finally break through resistance.
The ascending triangle is a continuation pattern. Prices come from an uptrend then prices bounce inside the triangle before breaking higher.
To confirm the breakout, the price should close above the resistance line, if so, make a long. The profit target is the distance away as the back of the triangle.
Another way to use "Divergence" to spot Fakeout from Breakout -is to find out if the momentum is getting stronger or weaker, if the chart make a higher high and the indicator made lower high so it refer to; the momentum is decreasing, in order to spot the (breakout from fakeout)
-in this example we have a rectangle consolidation, you can see the first breakout was a fake out, here we'll use divergence to spot this fake out take a look at the indicator is making higher low while the price get back to same low this indicate the momentum is decreasing, the bears are already exhausted and the price get back to rectangle pattern.
-But the next one was a real breakout look at the indicator is making lower low just like the price, also if you look what just happened next the price soar up to reach the support line of the rectangle pattern which is turned to resistance, the bears gathers more steam to push the price down
-Hopefully this was helpful and another tool to put it in your arsenal facing the market wish y'all a green week, Peace.
Bullish Consolidation 1-2-3-Breakout PatternThis is a great example of the 1-2-3-Breakout pattern on Bitcoin using the Daily chart.
This pattern can be applied to any equity. Chart patterns represent human behavior and that is a constant among all asset classes.
Point 1 - The First Test - The New High
Price reaches a new high and pulls back when investors take profits.
Price falls.
Point 2 - Second Test
New buyers come in and price tries to attack the highs for a second time. Often this attack fails, because there just aren't as many buyers as before, and people who didn't get a chance to sell at (1) now have a chance, so they sell and run to the bank.
Price falls.
A trend line has now formed between point 1 and 2. This downward trend line basically shows us that price is making lower highs. What we want is to see a higher high, which is an uptrend. Pretty easy right?
Well we can't see a higher high until we break out of the downtrend, meaning, we have to break out of this trend line.
Point 3 - Third Test
People start to watch the trend line as well, so it becomes a self-fulfilling prophecy and the price starts to get stuck under the trend line.
In general, we know that we have less buyers here than before. So here we ask the question, will we ever breakout of this downtrend? Or will we crash down because the buyers are disappearing
Point 4 - The breakout
Now we have the answer. This is VERY OFTEN the fail or succeed point of a pattern like this. After 1,2 and 3 tests of the downtrend, either buyers will give up and go home, meaning sellers take over and price breaksdown OR new buyers come in from somewhere, or maybe they were just waiting for lower prices to buy. Whatever the reason, they step in and start buying. We breakout of the downtrend line, and that inspires more buyers to come in because they were the ones waiting for the trend line break. And then price starts moving fast because everyone wants to buy. THen the media says "this is a great buy" and boom more people come in.
Until finally....we reach a new high price (1) once again. Investors take profits and the whole cycle repeats itself.
If we IDENTIFY the patterns, and RECOGNIZE the breakout points, then we can be prepared to jump in at a favorable point.
Creative use of RSIDue to the nature of an oscillating indicator such as an RSI vs lagging idicators such as MACD, the breakout of the RSI Linechart may indicate a range breakout and volatility expansion before price action.
How to Trade a Range and Potential BreakoutHello Traders,
All of us want the price action to follow the direction of our trade but that doesn't happen always. The price action has a natural tendency to move up and down; build ranges and develop patterns. Most of the ranges and patterns are like whipsaws and many traders stuck in these situations and lose money. The most effective ways to deal with such a price action is patience and a better strategy. When I say better strategy that means the one which keeps you ahead of the others.
In this backdrop, I have tried to spot better entry points in case the price action builds a range after a nice up move and we are visualizing a potential breakout on upside. The basic principle behind the strategy is to "Buy at the low and Sell at the high". It should be noted that the entry spots can not guarantee sure win but surely minimize our risk and increase the chances of reward. After an entry, stops can be placed either below the range or below the prior swing low -- whichever suits the situation.
Same strategy can be applied, in opposite direction, in case the overall trend is down and we visualize a potential breakdown after a range.
Notes on the chart.
Hit like for better educational publications in future. Comments are welcomed.
Trade safe.
Best Regards
Bravetotrade
1: How To Trade Breaksouts?!Hi guys. For questions please feel free to message me.
Also take a look on my account for my free analyses, I will keep it up to date every week.
Keys to the PROFITABLE TRADING III. - Breakouts I.Hey Guys, today I want to start writing about breakouts.
As I have read many articles these days it almost looks like the breakouts shouldn't be traded at all. Many traders even despise breakouts because one is entering trades TOO late. But the truth is there is many situation where the strong BO gives nice confirmation for a trade.
In this part I want to give you some points how the right breakouts should look like.
The Price Action before entry bar:
1. Bars should create some form of triangle. It means the market should become narrower.
2. The momentum of the bars should be low. I will write about measuring the momentum in some other article. But easily said the range of the bars should be also narrower.
-> these 2 conditions ensure that the market is waiting for something bigger. It often means some form of accumulation or distribution.
3. There should be some free area for BO.
The Entry Bar:
1. The BO bar should be a trend bar - if long - open near low and close near high and vice versa .
-> it means that the buyers was much more active all the day
-> they did not let the price fall under the open and even the high price of the day is not too high to trade there before close
2. The range of the bar should be above average.
- there is no exact number how much above average
- you also do not have to count it, the BO bar have to be easily visible
3. The close of the bar should be out of the triangle pattern.
- also no exact number, you have to see it
4. The BO bar have to be easily visible.
- maybe the most subjective condition but also the most important
- IF YOU HAVE TO LOOK FOR THE PATTERN, IT IS NOT THE RIGHT ONE!
The Price Action after the BO bar (after you enter the trade and the idea works):
1. There should not be quick reverse bar.
- it is quite clear, but it has to be written because of the other condition...
2. There can be more small reverse bars, pins, dojis etc.
- many traders make a mistake they are moving the stoploss bar to breakeven very quickly
- after the BO move there can be some small exhaustion, not many traders want to trade for this price YET and some can even exit if they enter before the BO
- it can happen and you have to wait and just be aware of rapid reverse (it means big counter move in short time)
3. If the price creates some swing and then retest it the price should go through this swing.
(or not reverse quickly at least)
- after the BO one is waiting for creatin some form of trend and the main character of trend is that the price is creating swing which is also breaking
-> if the price can't break the swing, it shows us that the BO is not as strong as we have waited
OK. It was some basic conditions for trading breakouts successfully. Next time I will go through the trading situations on this chart and will explain these conditions more practically.
If you have ANY questions about breakouts, write them down below please.
Paul
(public) - Educational for beginners by Trading_Jazz ®FX:EURUSD
Notes for beginners;
Safe Trades;
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EURAUD: Reviewing The Tape (Education not a trade idea)I've already written my "Trading Recap" blog post for today but I wanted to share something with you guys. For you guys that have been following along with my blog you know that I've been working on an article looking at professional athletes and professional traders. One of my main comparisons is the amount of preparation and review that both do.
Just like Peyton Manning or Tom Brady do after every game, after each trading day I review the tape, meaning that I go back through my trading day and critique myself. After all, in this industry we are our own bosses so if we don't do it who will?
Last night I posted a trade looking for a potential breakout to the upside on EURAUD, although we did test the highs of our previous structure level we never got the break that I was looking for and it ended up being a scratch trade (breakeven). This morning in our Warroom meeting Jason Stapleton fired off 2618 idea for this same pair. (I'll attach a link to the FREE 2618 training at the bottom of this post). In the live room we ended up finding a bearish Cypher at the same level and ended up getting short as well. After banking some good pips, I spend the rest of our session going through the rest of my portfolio and basically but this pair on the back burner.
BIG MISTAKE, if only i would have paid more attention to it, i would have seen that IF our 2618 setup were to rally to 2nd targets THEN we'd also have a Bat pattern completion which we plant a stop & reverse at. So yeah I left a few pips on the board today but the important part is that I was able to identify my mistake and turn it into a learning experience. For those who don't take the time to review their day, well that mistake may continue to be a future mistake.
Thanks for taking the time to read this and I'll see you next week at the Technical Trader Workshop!!!
FREE 2618 Training Lesson: www.youtube.com
2015 FREE Technical Trader Workshop: promos.tradeempowered.com
