If there is one market condition that excites
traders and analysts alike, it would probably be the breakout.
Breakouts occur in fast markets, when news or
fundamentals have triggered a strong rush of buyers or sellers into the
marketplace, as prices purge previously respected support or resistance
barriers.
To take a breakout strategy a step further,
traders can look to filter there trading opportunities with various indicators.
Some traders look to trade breaks only in the direction of the trend – so they
might look to a moving average to denote which direction the trend is moving so
that the breakout entry order can be properly applied.
There are numerous mannerisms of trading
breakouts, but most revolve around a similar premise: Identifying resistance
levels that traders want to buy if broken, or support levels that traders want
to sell if broken. This can be done with Price Action, Pivot Points, Fibonacci, or any other mechanism of
identifying support or resistance levels.
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