Thursday, 12 February 2015

Breakouts

Breakouts

Remember,
  1. Most of the attempts to do a breakout fail.  There will be a very few successful breakouts.
  2. A trend will often begin from a breakout of a support or resistance level.
  3. Speed of action (urgency to act) and conviction for the real breakout are vital when the breakout happens.
  4. A breakout in the direction of the prior trend serves as a confirmation that this trend is still valid, while a breakout in the opposite direction of the prior trend implies that this trend is probably reversing.
  5. Prefer trading the with-trend breakout rather than the counter-trend breakout, and enter in the direction of the breakout if there was a pullback after the breakout.
  6. Breakout test (or pullback) is very important because it provides a reliable entry signal when the test is successful and the trend resumes.  
  7. Usually high volume tends to improve the chance of a pullback occurring after the successful breakout.  If a breakout is accompanied by noteworthy high volume, there is a good chance for a pullback to happen.
  8. If prices just pause for a bit rather than pull back after the breakout, there is a high likelihood of prices continue moving in the direction of breakout after the pause.


1 comment:

  1. Thanks a lot for these vital inputs. Eagerly looking forward to upcoming posts.

    S.Karthikeyan

    ReplyDelete