Monday, February 16, 2015

FOREX THEORY


Fade the Breakout

Fade the breakout you say? Was that just a typo? Did you mean to say, “trade the breakout”?

Nope!

Fading breakouts simply means trading in the opposite direction of the breakout.

Fading breakouts = trading false breakouts.

You would fade a breakout if you believe that a breakout from a support or resistance level is false and unable to keep moving in the same direction.

In cases in which the support or resistance level broken is significant, fading breakouts may prove to be smarter than trading the breakout.

Keep in mind that fading breakouts is a great short-term strategy. Breakouts tend to fail at the first few attempts but may succeed eventually.

REPEAT: Fading breakouts is a great short-term strategy. It is NOT a great one to use for longer term traders.

By learning trade false breakouts, also known as fakeouts, you can avoid getting whipsawed.

Trading breakouts appeal to many forex traders. Why?

Support and resistance levels are supposed to be price floors and ceilings. If these levels are broken, one would expect for price to continue in the same direction as the breakage.


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