Learning to catch High Probability Breakouts

[amitrandive]

 

[XRAY27]

Trading Common Gap

Common gap opens with a gap and bears rush in to fill the gap.Bulls who were long overnight , rush to book profits and market starts filling gap.
Similar gap in Nifty on 4/3/2015.Great Shorting opportunity.
Target is usually the gap closed.Or in this case the target is twice of the gap.

5 min Chart of Nifty on 4/3/2015.

Amit !!!

just pointing some points ....

Common gap and 5 min chart gap are different !!! that gap is a exhaustion Gap...

Please refer this article

http://w w w.finvids.com/Chart-Pattern/Gaps

 

[amitrandive]

Amit !!!

just pointing some points ....

Common gap and 5 min chart gap are different !!! that gap is a exhaustion Gap...

Please refer this article

http://w w w.finvids.com/Chart-Pattern/Gaps

Thanks XRAY
That is why we need guidance from seniors like you.
:clapping:

 

[Sunnyraj]

Sunnyraj

A trap zone is an area where traders are trapped.In Xray's chart if you take a positional short on Bharti, it may only go upto the second level of support and bounce back to trap the bears.

Its a fake breakout sometimes which gives a very high probability trade in the opposite direction where the pattern indicates.
See below a fake breakout example.

Thanks for the explanation amitji


From the chart we can say that such types of breakout are very risky for the traders.

In the chart 84 level is a resistance.After touching the level on 3rd march,it again tried to touch the level on 7th April and 12th may.After 27th may it closed above the level several times.

I have one question here. As a newbee trader i would go long here as price has crossed and managed to close above levels which it tried to test 3 times.

So, how to avoid the false breakout. Should we wait for some days and let the price create higher-highs ?

This question is very imp coz on every chart we mark S&R levels and every time price crosses major resistance , i will doubt for a false breakout.

In next comments Xray sir has mentioned that this generally occurs when there are linear patterns.

Can someone please post some more charts so that the concept becomes crystal clear.

 

[hedgefudge13]

Amit !!!

just pointing some points ....

Common gap and 5 min chart gap are different !!! that gap is a exhaustion Gap...

Please refer this article

http://w w w.finvids.com/Chart-Pattern/Gaps

Woow ! thanks alot sir .
Was making a strategy to trade in the 1st 30mins of the day as it has really good range and quick profit capacity . you just made my work easier .

Thank you .
HedgeFudge

 

[amitrandive]

Thanks for the explanation amitji


From the chart we can say that such types of breakout are very risky for the traders.

In the chart 84 level is a resistance.After touching the level on 3rd march,it again tried to touch the level on 7th April and 12th may.After 27th may it closed above the level several times.

I have one question here. As a newbee trader i would go long here as price has crossed and managed to close above levels which it tried to test 3 times.

So, how to avoid the false breakout. Should we wait for some days and let the price create higher-highs ?

This question is very imp coz on every chart we mark S&R levels and every time price crosses major resistance , i will doubt for a false breakout.

In next comments Xray sir has mentioned that this generally occurs when there are linear patterns.

Can someone please post some more charts so that the concept becomes crystal clear.

SunnyRaj

It is sometimes very easy to identify fake breakouts,when the candle does not convincingly close above a particular level.

Most of the times it is very difficult.Better to trade on retrenchments than the original breakout.Still sometimes the stocks breakouts non-stop and does not allow re-entry.At these times it is wise not to chase the stock and search for better opportunity.

High probability trades are always those trades which are associated with low risk and high reward.

Posting some samples for clarity.

http://www.dailyfx.com/forex/educat...5/22/Simple-Way-to-Avoid-False-Breakouts.html
http://forexop.com/breakout-trading-basics/

 

[sangram1705]

Sunnyraj

A trap zone is an area where traders are trapped.In Xray's chart if you take a positional short on Bharti, it may only go upto the second level of support and bounce back to trap the bears.

Its a fake breakout sometimes which gives a very high probability trade in the opposite direction where the pattern indicates.
See below a fake breakout example.

Just another way of looking at same chart: (marked in black bold)

However comparing which one is a better entry is not possible without looking at further left of chart/Higher TF chart.

 

[amitrandive]

Just another way of looking at same chart: (marked in black bold)

However comparing which one is a better entry is not possible without looking at further left of chart/Higher TF chart.

Thanks Sangram

You have shown that support/resistance are not always horizontal.
:clapping:

 

[Riskyman]

Amit, Just an observation here. The trend line should have ideally connected the previous small peak made sometime of 5-6th of may at the 82$ mark and not horizonal at 84. I have marked the same with a red line. There is a nice breakout with the stock rallying a bit and then there is a pullback right back to the trendline and 50 ema support area.

Personally i would not classify this as a breakout failure but a pullback. Stocks pullback a whole of of times after a breakout. Great time to buy the pullback as small stops can be placed under key support areas. See how the stock after pulling back takes consitent support for 7-8 days at the trendline.

 

[amitrandive]

Amit, Just an observation here. The trend line should have ideally connected the previous small peak made sometime of 5-6th of may at the 82$ mark and not horizonal at 84. I have marked the same with a red line. There is a nice breakout with the stock rallying a bit and then there is a pullback right back to the trendline and 50 ema support area.

Personally i would not classify this as a breakout failure but a pullback. Stocks pullback a whole of of times after a breakout. Great time to buy the pullback as small stops can be placed under key support areas. See how the stock after pulling back takes consitent support for 7-8 days at the trendline.

Thanks Riskyman !!!
:clapping: