As it turned out, not everyone knows how to trade correctly in such market situations, so let’s start learning.
The trend is our friend! Everyone knows this expression, but do not forget that the trend will end sooner or later and the price will go in a different direction.
These situations can potentially be very profitable for a trader.
Breakouts occur not only during a trend, but also in accumulation zones.
To find an opportunity to trade a level breakdown, you need at least two conditions:
1. There must be a trend or accumulation zone.
2. You need to wait for the level to break.
How to trade?
There are a couple of principles for correct breakdown trading.
First, we find a trend movement (or accumulation zone), draw a support/resistance line and wait for the moment when the price breaks this line.
However, a breakthrough is not enough.
There are many situations in the market where the price false triggers, so you have to wait for the confirmation.
After the collapse of the level, the price should close below the level; This means that the balance of forces has changed in the market, the trend has dried up and now the bears are putting pressure on the market.
And only after that we have to wait for the most important condition – repeated testing of the level.
Quite often, beginners are in a hurry, not waiting for the level to be retested, which leads to huge losses.
After the collapse, the price should
go back to the level again
– these are the bulls again trying to dominate the market, trying to push the price back above the level.
But the forces are no longer sufficient and the price, after repeated tests, turns around and follows a bearish scenario.
It is after the reversal that it is worth opening a position, as it signals the weakness of the bulls, the market can no longer move up.
It is worth noting that the price may not always return to the level of the broken level.
From time to time, you will notice a small incoming move in the direction of the level being made, but not enough strength, after which the price reverses without retesting.
Do not forget to put a stop loss, which is best set above the level.
All of these rules also work to break the downtrend, just in the opposite direction.
Trade wisely, good luck everyone!
Traders, if you liked this idea or if you have your own opinion about it, write in the comments. I’ll be happy