Trading With Breakouts and Bounces
Prices in the forex market or market do not always move in one direction only, up or down cannot be predicted by the naked eye by traders. Therefore, in learning forex trading, what is no less important is how to take advantage of market prices when they are in a state of bounce (bouncing) or when prices experience a breakout. Breakouts and bounces are one of the keys to easy trading. Both terms will often appear to signify the potential for the next price movement, if the price movement approaches certain levels. Whatever technical indicators a trader uses, whatever trading method is used, will definitely target the position of the price movement to Breakout or Bounce; because, Bounces and Breakouts in forex mark the emergence of trading opportunities with the best potential. What are breakouts and bounces in forex trading?
1. Breakout
Breakout in forex is a condition where the price breaks through Support or Resistance. In technical analysis, a breakout is a breakout or break of a support or resistance. Not forever support or resistance will last, one day the support or resistance level will definitely be solved. Often, a breakout indicates a very large trend strength in maintaining its pace, or forming a new trend. Breakout is divided into two, namely break down and break up. The main characteristic of the Breakout is the closing of the price through the Support or Resistance limit. In detail, the price must close higher than the Resistance limit or lower than the Support limit. If the price is unable to close at these conditions, it means that the Breakout has not or failed to occur. Watch the video below for clearer and more detailed information!
2. Bounce
Bounce in Forex is a condition when the price bounces after approaching the Support or Resistance limit. Contrary to Breakout, Bounce indicates a weak continuation of the latest price trend. The bounce itself often occurs when the price is still in a sideways condition, and if there is a breakout that penetrates the Support zone, then the next price may experience a downtrend (Downtrend). Meanwhile, if the Breakout penetrates the Resistance zone, then the next price may experience an uptrend (Uptrend). Many traders refer to bounce trading as swing trading, why is it called swing trading because this technique utilizes price reflections when they have reached support and resistance, this reflection is a signal that the support or resistance level is still strong.
That's a brief explanation from us, hopefully this article is useful for traders. Thank you
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