Did you know that the trading signals experts share on social media platforms are only the price behavior of an asset at a particular time? What is the historical context, and what is the expected future trend? No one knows. If you pay more attention to every signal, naturally you have an instinctive stress, and your performance declines.
To simplify this process, first we divide the market into two categories. A flat market where nothing has been changing and an oscillating market where volatility is the huge business. The oscillating market is further subdivided into narrow oscillating markets and wide-range markets. The cheat codes, patterns, and filters are always used in oscillating markets, such as triangles, rectangles, wedges, flags, heads and shoulders, W bottoms, M heads, etc. Did you know that you can make money by just identifying the winning rate patterns on the trading chart?
What is Breakout and Breakdown?
Breakouts and breakdowns are the most popular and fundamental concepts. Both are closely linked to support and resistance levels of an asset.
By learning the intricacies of breakout and breakdown, you are able to differentiate between successful trading and missed opportunities. A confirmed breakout indicates strong buying pressure, and the asset prices soon reach the sky, and a breakdown indicates strong selling interest. These two points are extremely important because if you are entering and exiting at the right time, you are able to maximize your profit potential.
Support levels: It refers to where asset prices are not falling because of the buying interest.
Resistance level: It refers to where prices are prevented from rising further.
These levels are also changeable, and when an asset price jumps from the last resistance level, both types of levels have been changing position accordingly. Most traders use moving averages to determine when the breakout and breakdown will occur.
Some traders draw lines to significant price highs and lows and create different pattern charts and triangles and learn about the next outcome of this trend. For example, expert traders use head and shoulders patterns to confirm the possible breakout or breakdown in future trading. Breakouts and breakdowns are also commonly used to find out the momentum and volatility spikes.
In addition, the only breakout and breakdown are not enough. You also need additional confirmations. For example, if an asset is broken against a resistance level. An expert trader always confirms the volume and overbought conditions through the RSI indicator. If all conditions are true, it means this asset has strong support for an entry point.
Finally, using breakouts, breakdowns, support, and resistance levels is not the complete solution, but you need to learn more indicators and chart patterns in order to achieve better results.
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