Break support/Resistance, give confirmation? - We usually trade base on S/R to find the entry point, exit or to predict the trend. - One of an effective and simple way in trading is to trade when price breakout from a S/R level - However, to identify an area or a point of good S/R in trading is mostly based on trading style, knowledge and trading experiences from each individual. Today I would like to talk about Breakout in trading. When it is breakout, when it is failed breakout. Before talking about breakout, we need to identify price closes above a S/R level or below a S/R level. Examine the below chart:
However, in the chart we also find the situations that market didn't follow the mentioned rule.
In the above case, if we carefully examine, we would see a pair of candle close below a resistance zone and make price go down. And price is still following rule of breakout and give confirmation as usual. There are a lot of S/R appear in trading market. So, we have to choose by our own which is the S/R zone to play in each situation depending on our own experiences. No situation is exactly the same with each other! In the same above situation, at the same S/R level that we identified and used before, prices move differently (at that points, mostly our stoploss is hunted) Here, experienced traders would easily recognize failed breakout based on trend analysis, or the way prices breaks, or at least don't follow the breakout. We can analyze in a simple way as follow: And then price continues its trend I have presented some simple cases of successful breakout, failed breakout or fake breakout in the above chart. I would like to receive the contributions from the community to learn from each other. Noone is right or wrong all the time. Every wrong or right cases have its own price. Hope that people would not keep silence instread of telling what you know or learned. Nothing has its own value unless it spent some prices. I hope that people would give a way their knowledge, don't try to hide for your own if not we are all failed to this market.
I just read the candlestick trading bible and your analysis goes right along with the book, you make it a bit easier to understand, I'm definitely going to read the book again and continue to follow you so that I may hone in on my trading skills. Thanks again @datong
DatTong
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@DJSmith, I have no idea about that book but if you find it is in line so it's good sign.
Nice work. I use the same analysis method on price chart which is mainly horizontal S/R, no MA, no MACD and RSI. I found indicators such as moving averages, MACD, and RSI distract trader, because they are all lagging price. After I dropped all of price related indicators when I make trading decision, I start to profit peacefully. I use only Trend and price action to make trade decisions.
Will also read all related (educational) material