Taking A Right Breakout Trade Can Be Really Benifical, But What If It Is A Fake Breakout , Than It Will Be A Real Pain ....
There Is No Way One Can Completely Avoid All The False Breakout , But It Is Possible To Avoid Most Of Them With Certain Strategies ,Which We Are Going To Talk About In This Post .
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So, Lets See How To Not Trade A Breakout And Avoid Fake Breakouts...
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Types Of Breakout :-
These Are The Basic Types Of Breakouts That Are Majorily Traded Around The World .So We Will Countine Our Discussion Taking Above Types Into Consideration .
Breakout :- When The Price Of A Particular Stocks Closes Above A Price Zone (Support & Resistance ) Which Is Previously Tested By The Stocks Many Times .
Fake-Breakout :-When The Price Of A Particular Stocks Fails To Sustain Its Position Above The Support Or Resistance Level And A End Up With A Reversal .A False Breakout Happens When There Are Not Enough Buyers To Continue The Trend In Breakout Direction.
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Look For These Things To Make Your Breakout Successful
Candlestick Pattern
Volume
RSI
Indices
Support And Resistance
.
.
.
Candle Stick
Assuming that you already know about the bacis of candle , look if there is bullish or bearish candles at the time of breakout .
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Rsi
check the levels of rsi , check wheather if it is in the overbought(>80) region or oversold(<20) region . RSI below 40 a good for breakout , and above 70 is unhealthy for a breakout . Also check for the divergence RSI indicating .
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.
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Volume
Look for volume buildup at the time of breakout
Indices
You Can Also Look For Nifty Or Bank Nifty Index Or Particular Sectoral Index
Like If You Are Planning To Take A Breakout Trade In Hdfc Than Look At The Charts Of Banknifty Also , Like If It Bullish Or Not , If It Bearish Than Dont Take Trade With Your Full Capital Instead Trade With 50% And Add Another 50% At The Of Retest Or Look For Pullback At Lower Timeframe , Assuming All Above Factors Candlestick, Rsi, Volume Are Favouring The Breakout .
Support And Resistance
Instead of drawing a suppport and resistance a single flat line always draw a price zone indicating support and resistance zone covering the shadows of the candle
You Can Also Use Ema And Couple It With The Above Factor To Add A Extra Confidence To Your Analysis
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Some Other Key Factors ...
1)Market Will Give You Infinte Oppourtunities So Dont Take Trade Based On Emotions .
2)Dont Enter A Trade If Your Price Is Already Went High .
3)If Price Is Moving Rapidly In One Direction And Then Breakout Happens Than Wait For A Reversal And If The Price Consolidate On Lower Time Frame Berfore The Breakout And Then Gives A Breakout There Are Less Chances That It Will Retest The Breakout Levels So Enter As Soon As You Got The Opppourtunity
4) Last but not least never stop learning and keep grinding
HOPE YOU HAVE ENJOYED THE POST , WISH YOU A HAPPY TRADING JOURNEY AHEAD
There Is No Way One Can Completely Avoid All The False Breakout , But It Is Possible To Avoid Most Of Them With Certain Strategies ,Which We Are Going To Talk About In This Post .
.
So, Lets See How To Not Trade A Breakout And Avoid Fake Breakouts...
.
.
.
Types Of Breakout :-
- Trendline Breakouts
- Pattern Breakouts (Parallel Channel ,Triangle.....)
- All Time High Breakouts
- Support And Resistance Breakout
These Are The Basic Types Of Breakouts That Are Majorily Traded Around The World .So We Will Countine Our Discussion Taking Above Types Into Consideration .
Breakout :- When The Price Of A Particular Stocks Closes Above A Price Zone (Support & Resistance ) Which Is Previously Tested By The Stocks Many Times .
Fake-Breakout :-When The Price Of A Particular Stocks Fails To Sustain Its Position Above The Support Or Resistance Level And A End Up With A Reversal .A False Breakout Happens When There Are Not Enough Buyers To Continue The Trend In Breakout Direction.
****************************
Look For These Things To Make Your Breakout Successful
Candlestick Pattern
Volume
RSI
Indices
Support And Resistance
.
.
.
Candle Stick
Assuming that you already know about the bacis of candle , look if there is bullish or bearish candles at the time of breakout .
.
Rsi
check the levels of rsi , check wheather if it is in the overbought(>80) region or oversold(<20) region . RSI below 40 a good for breakout , and above 70 is unhealthy for a breakout . Also check for the divergence RSI indicating .
.
.
Volume
Look for volume buildup at the time of breakout
Indices
You Can Also Look For Nifty Or Bank Nifty Index Or Particular Sectoral Index
Like If You Are Planning To Take A Breakout Trade In Hdfc Than Look At The Charts Of Banknifty Also , Like If It Bullish Or Not , If It Bearish Than Dont Take Trade With Your Full Capital Instead Trade With 50% And Add Another 50% At The Of Retest Or Look For Pullback At Lower Timeframe , Assuming All Above Factors Candlestick, Rsi, Volume Are Favouring The Breakout .
Support And Resistance
Instead of drawing a suppport and resistance a single flat line always draw a price zone indicating support and resistance zone covering the shadows of the candle
You Can Also Use Ema And Couple It With The Above Factor To Add A Extra Confidence To Your Analysis
.
.
Some Other Key Factors ...
1)Market Will Give You Infinte Oppourtunities So Dont Take Trade Based On Emotions .
2)Dont Enter A Trade If Your Price Is Already Went High .
3)If Price Is Moving Rapidly In One Direction And Then Breakout Happens Than Wait For A Reversal And If The Price Consolidate On Lower Time Frame Berfore The Breakout And Then Gives A Breakout There Are Less Chances That It Will Retest The Breakout Levels So Enter As Soon As You Got The Opppourtunity
HOPE YOU HAVE ENJOYED THE POST , WISH YOU A HAPPY TRADING JOURNEY AHEAD