Day Trading Forex with S&R Zones - Forex Trading System by Damir Laurentiu

Author:Damir, Laurentiu [Damir, Laurentiu]
Language: eng
Format: epub, mobi
Published: 2012-08-03T00:00:00+00:00

You can see in this diagram that the breakout 1h candle closes below the support level and more than half of its body is situated below the support level.

In the example above, we have something very interesting. The first candle that tries to break through the support level fails and quickly goes back up closing within the territory of the support level. This is definitely not the breakout candle. Next, we have a small candle that indeed closes below the support area and also has more than half of its body below the support. This corresponds to the definition of the breakout I gave earlier but there is a problem with this candle: It is very small in size. Do not consider such small candles as breakout candles even if they fit the definition of a breakout. For a breakout to be true, it has to happen with force, price has to create a big candle to show us that the sellers in this case, are committed to push the price down further. A small candle does not show too much commitment from the sellers. Such small candles usually form in late New York session and in the Asian session when the market in choppy and there is not much volume in the market. A valid strong breakout usually takes place in the European session. Next, we finally have a breakout of that support level with a huge bearish candle that is entirely below the support level. This is the true breakout and this is what we will use to enter our orders in the market.

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