(False) Breakout & Trend Reversal Strategies??

olimits7 · Jun 24, 2005

Hello, everyone!

I was wondering what strategies/systems/tips everyone uses to determine if a breakout is valid or if it's a false breakout? Also, what strategies/systems/tips do you use to determine a trend reversal?

I'm able to draw trendlines and have gotten very good at finding support & resistence levels on charts. But I'm still having problems when it comes to breakouts & reversals. I can't seem to determine if the breakout or reversal will take place on support line 1 or if it will continue to my support line 2.

For example, I will see a trend that keeps on bouncing off my support line. So I set up a trade if it breaks the support line by certain number of pips short and if it bounces off a certain number of pips go long. But once I'm in a trade everytime I see a bearish/bullish candlestick depending if I went short/long. I think the move is over and about to reverse; so I close my position. Instead the move continues in the same direction it went, and sometimes continues to another breakout line.

Thank you for your help, I appreciate it.
olimits7

JumpOff · Jun 25, 2005

I expect that if you will post a chart example, several people will respond.
JO

olimits7 · Jun 25, 2005

Ok, I attached an example so people can see what I'm talking about. I hope this helps.

Thanks,
olimits7

RUDEBOY · Jun 25, 2005

Hello, olimits7. Reversals? My advice would be not try to pin point a reversal (exactly)? If you personally think there may be a reversal then your 'money management' should allow for this. TA alone can not put you in the 'black', if you know what i mean? You need to gauge the market through TA/MM (your personal view of the market). Reversals at any timeframe are 'obviously' the key factors of trading/investing, so, get to know your time! Don't take this the wrong way, but, before you ask others, ask yourself. You need to learn for yourself. This is the best way, as you will truly be trading for yourself. This is essential in the long run if you are to fully understand reversals. Hope this helps. RB.

sulong · Jun 25, 2005

Are you aware of horizontal S/R levels? If so, perhaps if you had those levels marked out also, you could have a 3 part condition opposed to two.
For instance... If the the horizontal line, and the diagonal line, and the price all converge at the same time, you take your trade.
You may see something interesting by comparing the results of the two part and the three part together.

RUDEBOY · Jun 25, 2005

May i also add that trade 'build-ups' posted on here (not that they are wrong), do not allow for 'personal' involvement. Everybody has a view/option! olimits7, your perception of TA needs to be 'right'. RB.

RUDEBOY · Jun 25, 2005

NUMB, should be the EXACT! RUDEBOY!

RUDEBOY · Jun 26, 2005

Olimits7, reversals and breakouts create 'hopes and fears', try to concentrate on direction. It's the the 'only' 'way'.

dbphoenix · Jun 26, 2005

RUDEBOY said:
It's the the 'only' 'way'.

Red flag . . .

onepipwonder · Jun 26, 2005

breakouts

olimits7 said:
Hello, everyone!

I was wondering what strategies/systems/tips everyone uses to determine if a breakout is valid or if it's a false breakout? Also, what strategies/systems/tips do you use to determine a trend reversal?

I'm able to draw trendlines and have gotten very good at finding support & resistence levels on charts. But I'm still having problems when it comes to breakouts & reversals. I can't seem to determine if the breakout or reversal will take place on support line 1 or if it will continue to my support line 2.

For example, I will see a trend that keeps on bouncing off my support line. So I set up a trade if it breaks the support line by certain number of pips short and if it bounces off a certain number of pips go long. But once I'm in a trade everytime I see a bearish/bullish candlestick depending if I went short/long. I think the move is over and about to reverse; so I close my position. Instead the move continues in the same direction it went, and sometimes continues to another breakout line.

Thank you for your help, I appreciate it.
olimits7

it's normal for a breakout to reverse and then go back to the breakout direction, that's why you should never trade an initial breakout, espceially in a non - trending range market.
1. set your supp / resist levels
2. decide your entry levels on either side
3. wait for intiial break out
4. see pull back
5. make trade after confirmation of resumption of direction on the candles.
6. set stop loss just above / below the reversal level., if you set your stop above / below the support / resistance lines, then you have a high prob of getting stoped out b/c of the commonality of a short reversal after a false breakout.

hope that helps

OPW

commanderco · Jun 26, 2005

olimits7 said:
Ok, I attached an example so people can see what I'm talking about. I hope this helps.

Thanks,
olimits7

I would say your example is a bullish TP (turning point)
You can see the low tested twice.

olimits7 · Jun 27, 2005

Thanks for the replies, they were very helpful.

olimits7

(False) Breakout & Trend Reversal Strategies??

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