Kinds of Breakouts
Breakout is a forex strategy that relies on a price breakout from a key level as a trigger for entry. These key levels can be in the form of important support and resistance levels formed from psychological levels, manually observing price highs and lows, drawing Fibonacci lines from swing points, or calculating privot points. The breakout moment is often awaited by traders, especially traders who follow the trend following strategy. That's because, confirmed breakout trading is often followed by a significant strengthening of the trend, so this method is a mainstay for traders who want to get maximum profit.
The main principle in breakout trading is to buy above the highest price (marked by resistance) or sell below the lowest price (support). The idea is of course different from the trading method in the sideways market, which expects the price to adhere to the support resistance boundaries. Technically, there are several forex strategies that can be used in breakout trading. The following are the types of breakout trades:
Continuation Breakout
Sometimes in the market, traders will see a period consisting of price movements that are always within a certain price range. In fact it represents a break between a seller's and a buyer's traders. Traders are taking a break to take a breather and this kind of price movement is known as consolidation. If traders then decide that the price should move like the previous movement then this will result in a continuation breakout,
Reversal Breakout
A breakout reversal has the same movement beginning as a continuation breakout and after a while or period the movement is stopped or delayed or the term is consolidation. It's just that after the consolidation is formed, traders agree that the price should move in the opposite direction from the previous movement to form a trend reversal or it can also be called a breakout reversal.
False Breakout
So the false breakout can be said as the failure of the price to form a breakout signal so that if the trader is not careful, the trader will be trapped in a loss. False breakouts usually occur when prices have broken through support, resistance, pivot points, triangles and so on but are unable to continue their movement so that traders will find a spike or price spike which then returns to the trading range,
A good way to trade with a breakout strategy is to wait for the price to break through the breakout level barrier and return to the breakout level barrier and then wait to see if the price will bounce back to create a higher or lower price (depending on the direction of the current price movement). traders trade)
Another way to trade with these false signals is to not rush to open a trading position but wait for confirmation that the breakout has actually occurred. But there is a possibility that traders will miss the opportunity if it turns out that the price has experienced a real breakout.
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