I have explained How to Avoid False Breakouts (My Secret Technique) in details. A false breakout occurs when the price temporarily moves above/below key support but later retreats back to the same side as it started. This is the worst scenario for a breakout trader that enters in the trade as soon as the price breaks. We are faced with a red arrow on our chart and the breakout we traded is looking less and less real.
Being forced to watch as breakout trades disintegrate in front of us is hard to swallow. We are left deciding whether we should stay in and ride it out for a quick loss. To avoid it in the future, we need to add a new rule to our existing breakout trading strategy.
The solution to this problem is simple than act on a trade-in in real-time. When price breaks a key level, we should wait until the candle closes to confirm the breakout’s strength. The idea of setting entry orders above or below support or resistance levels to get us into a breakout trade is not a good one. Entry orders will allow us to get wicked into breakout trades that never materialize. On the surface, this leads us to believe that the only way to trade breakout is to be at trading terminals ready to act as soon as the candle closes in breakout territory. Once the candle closes, we can open our position that hopefully has a higher chance of success.
view moreThe first thing there is no way you can avoid false breakouts completely. There are certain times a percentage that no matter how good the setup is. You are still going to get caught on a false breakout, but you can minimize the chance of you getting caught in a false breakout.
A build-up means the market is in consolidation and identified in three ways as it can be a series of higher lows into resistance, looking like ascending triangle. It can be a lower high coming into support as a descending triangle. Or it can be a tight consolidation at a market structure as support and resistance.
© 2020 All rights reserved My blogs (Posts) and videos is only educational purpose on stock market and depend on my self research and analysis. I can't advice to buy/sell any stock. because I'm not SEBI registered.If someone wants to inter the stock market, then my advice is first learn from an authorize institution or take advice from your authorized adviser.
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