Preschool>= Lesson Status ?
Kindergarten>= Lesson Status ?
Elementary>= Lesson Status ?
Grade 1 Support and Resistance Levels
Grade 2 Japanese Candlesticks
Grade 3 Fibonacci
Grade 4 Moving Averages
Grade 5 Common Chart Indicators
Middle School>= Lesson Status ?
Grade 7 Important Chart Patterns
Grade 8 Pivot Points
Summer School>= Lesson Status ?
High School>= Lesson Status ?
Grade 9 Trading Divergences
Grade 10 Market Environment
Grade 11 Trading Breakouts and Fakeouts
Grade 12 Fundamental Analysis
Grade 13 Currency Crosses
- What is a Currency Cross Pair?
- Crosses Present More Trading Opportunities
- Cleaner Trends and Ranges
- Taking Advantage of Interest Rate Differential
- Obscure Crosses
- Planning Around News and Fundamentals
- Creating Synthetic Pairs
- Euro and Yen Crosses
- How to Use Crosses to Trade the Majors
- How Cross Currency Pairs Affect Dollar Pairs
- Summary: Currency Crosses
Grade 14 Multiple Time Frame Analysis
Undergraduate>= Lesson Status ?
- Why Keep a Trade Journal?
- Benefits of Keeping a Journal
- What Should You Record in Your Journal?
- Potential Trading Area
- Entry Trigger
- Position Sizing
- Trade Management Rules
- Trade Retrospective
- Trading Journal Statistics
- Reviewing Your Trading Journal
- Difficulties of Keeping a Trade Journal
- Summary: Keeping a Trade Journal
Graduation>= Lesson Status ?
- Which Trading Style is Best for You?
- Which Currencies Should You Trade?
- What is Your Level of Trading Experience?
- Should You Be a Discretionary, Mechanical, or Hybrid Trader?
- What Kind of Mechanical System Suits Your Personality?
- What is Your Attitude Towards Risk?
- What Kind of Stop Suits Your Trading Style?
Summary: Trading Breakouts and Fakeouts
With breakout trades, the goal is to enter the market right when the price makes a breakout and then continue to ride the trade until volatility dies down.
Breakouts are significant because they indicate a change in the supply and demand of the currency pair you are trading.
You'll notice that unlike trading stocks or futures, there is no way for you to see the volume of trades made in the forex. Because of this, we need to rely on volatility.
Volatility measures the overall price fluctuations over a certain time and this information can be used to detect potential breakouts.
There are a few indicators that can help you gauge a pair's current volatility. Using these indicators can help you tremendously when looking for breakout opportunities.
- Moving Averages
- Bollinger Bands
- Average True Range (ATR)
There are two types of breakouts:
To spot breakouts, you can look at:
- Chart Patterns
- Trend lines
You can measure the strength of a breakout using the following:
- Moving Average Convergence/Divergence (MACD)
Finally, breakouts usually work best and FOR REAL with some kind of economic event or news catalyst. Always be sure to check the forex calendar and news before figuring out whether or not a breakout trade is the right play for the situation.
Institutional traders like to fade breakouts. So we must like to fade breakouts also.
Are you going to follow the crowd, or are you going to follow the money?
Think, act, eat, sleep, and watch the same movies as these guys do. If we can trade in the same way the institutional players do, success is just a glimpse away.
Fading breakouts simply means trading in the opposite direction as the breakout. You would fade a breakout if you believe that a breakout from a support or resistance level is false and unable to keep moving in the same direction.
In cases in which the support or resistance level broken is significant, fading breakouts may prove to be smarter than trading the breakout.
Potential fake outs are usually found at support and resistance levels created through trend lines, chart patterns, or previous daily highs or lows.
The best results tend to occur in a range-bound market. However, you cannot ignore market sentiment, common sense, and other types of market analysis.
Financial markets spend a lot time bouncing back and forth between a range of prices and do not deviate much from these highs and lows.
Finally, the odds of a fake out are higher when there is no major economic event or news catalyst to shift traders' sentiment in the direction of the break.
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- Trading Breakouts
- Ways to Measure Volatility
- Types of Breakouts
- Spotting Breakouts
- Measuring the Strength of the Breakout
- Trading Fakeouts
- Fade the Breakout
- How to Trade Fakeouts
- Summary: Trading Breakouts and Fakeouts