Trade on breakthrough. Protection against false breakthroughs.

13 ביולי 2019

Trade on the breakthrough. A trader tries to open positions at the very beginning of a trend, based on a breakthrough of a certain level of support or resistance. The graph shows how to protect yourself from false breakthroughs. It is better to take a little more expensive but just be sure than to take it many times and close the stop loss.

Trading on false breakouts.
False breakouts occur when the price breaks through a certain level (support, resistance, triangle, trend line, etc.), but does not continue to move in the same direction. Instead, you can see a short spike followed by a return to the previous range.

A good way to start a breakout trade is to wait until the price returns to the original breakout level and then see if it can form a new high or low (depending on which direction you are trading).

Another way to deal with false breakthroughs is to skip the first breakthrough that you will see, and see if the price will continue to move in your intended direction, thus you will have more chances to make a profit. The flip side of such a strategy is that you can miss out on some trades where the price moves quickly without any hesitation.