Breakouts out of trading ranges are of the most respected price movements by technical analysts. Trend followers adore them and short term swing traders who base their decisions upon overbought-oversold situations get anxious at their appearance. Technical analysis textbooks have a special section devoted to range breakouts and almost all trading methodologies incorporate a strategy for them.
In this article I will briefly review the classic breakout strategy and discuss the Habit Force which is hidden behind the false breakouts. In the sequence I will discuss the CWTW and CounterAttack tactics.
Trading Ranges – Review and Classic TacticsIn figure 1 you may see how a classic trading range looks. As its name implies, a trading range is a strip defined by two horizontal lines (a resistance line and a support line) which encompasses the price values (black line) of a trading vehicle for a time period.
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