Breakouts and preparation for Breakouts

Hi traders, Its been a week since I have updated the blog and In the meantime volatility has picked up and that is the reason I was busy in setups and I always look for my setups rather than forcefully look to sell and buy with the market behavior.

Example of Breakouts Or preparing for breakout

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Example in the chart shows that when you trade momentum and prepare yourself for breakout And force yourself to trade suc such spikes in price looking to breakout rather than look for volatility spikes which requires huge stops to cover your positions

Interestingly, When you have such tendency in moving market behavior then look for such low risk probability trades and that is the best way that let you ride most of the earlier part of trend. But in some cases even though it offers a pullback and You have to cover quickly but still Intra-day profits would have already booked before such action take place

Idea, thought behind such price action or breakouts is that You need to trade logic in the trend and when price is In "Balance" State of behavior which often tells you the strength, and No strong sell-off has been shown and If there is any sell-off is to be part of neutral day "Liquidation Trap".

Forex Trading Strategies l Beginners Price Action Based On Supply and De...

Momentum trading

I take some time to update the text, But in the meantime we have some more clues that market activity was balanced inside the bracket and market was ready to squeeze outside the bracket but soon afterwards we saw some selling and Again today after the test we see some aggressive traders participate again and mark the price higher even strongly than earlier.

Another classic example of Momentum trading

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Role of Candlesticks and Trading Mistakes

Volatility bias.

Many traders become to trade move actively after volatility breaks, in other words they tend to be more active after «trending» days – days with extended trading range. But if you analyze market statistics for at least last 5 years, you will see that more often market tend to consolidate within a body of the elongated candlestick (of course, I’m talking now about daily charts) for 2-3 days.

Role of candlesticks In Strong volitality breakouts

There is a very simple explanation for such market mechanics. Big market participants rarely come to the market and drive it to a new prices, instead they prefer to act as a market makers – to provide liquidity. In other words – they don’t chase running market, they try to accumulate position in consolidation before (most frequently) or after (more rarely) the breakout to make sure that their average fill will not be the worst.

On Forex market, days with extended volatility often don’t mean anything, it can be simply a «shakeout» or a single player stepping in the market without intention to continue pushing it to whatever side.

Solution: Don’t chase the market, find accurate trade location after market settles or when breakout is ready to occur, not after that.

I have posted an example of both charts in two different ways of looking at both of them as It will clear the thoughts

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