But to do this, you must be able to identify highly probable breakouts with these 3 key elements which are; 1) Well Defined Support/Resistance Level 2) Pre-Breakout Pressure/Tension (Squeeze) 3) 20EMA Carry, if you can learn to spot these key elements prior to a breakout. Let me show you an example of a breakout through a support area: This is the 240 minute chart of GBP/USD for Jun 15 Jul 16, 2015. A good way to enter on a breakout is to wait until the price retraces back to the original breakout level and then wait to see if it bounces back to create a new high or low (depending on which direction you are trading). Notice that on the lower side of the triangle there is a candle wick which goes deep into the support area. Below is an example of a clearly defined resistance level after a downtrend and consolidation period, communicating there are bears clearly defending a level.
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Breakout trading is a simple and popular trading technique used by many Forex traders for good reason. I consider a real breakout to occur only in situations when the price of the pair closes the candle beyond the level. Eventually the pre-breakout pressure and tension became too intense and the bears gave up when the bulls made their push, tripping stops and creating a large breakout bar with a strong close. Breakouts are also sometimes a direct result of significant news events, but such breakouts are difficult to predict. However, the bottoms of the price action cannot be connected with a single straight line. Therefore, we need to learn how to identify the real breakouts filter the fakeouts as much as possible. The price returns to test the already broken resistance as a support (or the opposite if it is a bearish breakout). Notice that algo trading stratégies de python the breakout candle is a strong Marabozu candle, which further confirms that this would be a reliable breakout signal.
Types of Breakouts in Forex How to Trade Breakouts in Forex