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 . . So, Lets See How To Not Trade A Breakout And Avoid Fake Breakouts... . . . 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.
**************************** 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 4) Last but not least never stop learning and keep grinding
HOPE YOU HAVE ENJOYED THE POST , WISH YOU A HAPPY TRADING JOURNEY AHEAD
RSI must be above 50 for a breakout and RSI above 60 is very good for breakout. RSI above 72 is overbought (so chances of reversal). RSI below 40 at the time of breakout means, its going to be a fake out. RSI crossing up 40 (from downside) indicates reversal.
Similarly, RSI must be below 50 for a breakdown and RSI below 40 is very good for breakdown. RSI below 25 is oversold (so chances of reversal). RSI above 50 at the time of breakdown means, its going to be a fake down. RSI crossing down 60 (from upside) indicates reversal.
Look for the above in 15 min timeframe in RSI (14) for best results. In 5 min timeframe, use RSI (21) which gives moderate results.
Sai_Kumar
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With due respect, I feel that your interpretation of RSI is incomplete. RSI is a momentum indicator and the name itself includes the word "Strength". Yes, RSI above 80 and below 20 are considered extremes but there's another story between 80 and 20. RSI above 50 indicates that the gains in the selected time period (Usually 14 period), is more than the losses and that's an indication of strong momentum. when it's below 50 it can be interpreted as weak momentum. Depends on the scenario, if there are divergences, the narrative changes. I consider RSI above 55 as strong signal. Below 50 as weak. above and below 80-20 as overbought and oversold.
rishievk2020
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your analysis is very good and easy to understand
sachinsharma77
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Really helpful for a beginner trader like me, but when you buy at breakout 1630 levels .. you SL should be 1600 (last swing) and if you trade acc to 1:2 R:R ratio .. your target should be 1690 levels .. as you are more experience in this field and giving us huge knowledge .. m not contradicting what you are saying dont get me wrong .. i was just showing if someone followed proper risk to reward ratio.. they might finish their trade in good position..
jyotinagaraj
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My way of entering the break out. 1, Wait for the break out to happen. 2, Wait for the pull back or reset. if reset doesn't happen, Don't worry pull back will happen with small magnitude but maynot reset, 3, Here the wait ends. enter the candle which is breaking the high (above the Resistance or value area). 4, Swing low or Resistance turned support is your STOP LOSS
himanxu_yadav
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@jyotinagaraj, Its always best to develop your own trading strategy and plan our trades according to them , Thanks for your valuable comment
Thank you for your valuable contribution to the Tradingview community and keep up the good work!