Are you a break-out price action trader? Here are the top things to know to be successful at break-outs trading.
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Understand your candlesticks. learn to interpret the information presented by a candlestick relative to other candlesticks on your chart. This includes relative sizes of wicks, real bodies, and their interactions with S/R zones.
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Learn support and resistance levels and practice drawing your trendlines. This will help you isolate market phases like impulse and consolidation. As a break-out trader, you want to analyze consolidations and ride impulses.
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Learn trend analysis. This involves studying price momentum, higher highs and higher lows, pull-backs, swings, and impulse-consolidation cycles. This will help you identify markets that are worth trading. Trendy markets are best.
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Now focus on a few key consolidation patterns that tend to lead into a nice break-out in the markets. Start with the:
1. Diamond Pattern,
2. Symmetrical Triangle Pattrern,
3. Ascending and Descending Triangles,
4. Rising and Falling wedges
5. Flags
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1. Diamond Pattern,
2. Symmetrical Triangle Pattrern,
3. Ascending and Descending Triangles,
4. Rising and Falling wedges
5. Flags
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In a diamond, the market switches from a megaphone ๐ฃ chart pattern to a symmetrical triangle โถ๏ธ which creates a diamond shape from the 4 outer trendlines. Watch that breakout like sniper fighting for his family.
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I won't go through all the patterns, but you can use the list above to study each pattern. Here is a few chart examples.
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Most often than not, based on my 10-year experience on forex charts, after a break-out, markets tend to retest the break-out zone before proceeding in the direction of the break-out. This recently happened on USDCAD.
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If you miss a break-out, be patient, don't chase after the spike. The market will, but not always the case, come back to the breakout point, and then proceed in the direction of the break. This is where the patient breakout trader enters. Look at gold on the 1st wk of May.
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Fake-outs are a break-out trader's worst nightmare. These one will humble you. This refers to when a market breaks out of consolidation, triggers your entry, only to reverse and head back into consolidation, or even a straight break-out on the other end.
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If you are caught in a false breakout, cut your losses short. Always practice prudent risk management. Here is a parting gift.
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If you enjoyed the thread, consider opening an account with @FxPesaKE here: bit.fxpesa.com andjoin my personal community of traders here: t.me. Folow for more..
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