Breakouts are one of the classic patterns that make probably work. One way to identify whether what you bought is a breakout is a rapid price moment away from the level and/or volume spikes.
The reasons for trading breakouts are fairly straightforward:
1. Technical Analysis is a self-fulfilling prophecy so for a pattern to work, everyone has to take the same action for the price to move. When the line is horizontal most of the time, everyone is indeed watching the same level. Diagonal trendlines are the worst thing ever invented. Never ever use a diagonal trendline.
2. Markets move from a period of non-volatility to volatility and we are essentially trading the volatility.
The reasons for trading breakouts are fairly straightforward:
1. Technical Analysis is a self-fulfilling prophecy so for a pattern to work, everyone has to take the same action for the price to move. When the line is horizontal most of the time, everyone is indeed watching the same level. Diagonal trendlines are the worst thing ever invented. Never ever use a diagonal trendline.
2. Markets move from a period of non-volatility to volatility and we are essentially trading the volatility.
Trade closed: stop reached:
Clearly, it was a very aggressive entry. This is a trade-off I'm willing to live it so no problem.
