[B]At what point would you say that resistance is broken? - [/B]It breaks when it breaks, whether 1 pip over or 50 it is considered a break of the Resistence or Trend Line etc.
[B]Is it a percentage or an actual value or one or the other combined with a time frame, ie a couple of hours? - [/B]When Resistence is broken, it is just that, it doesn’t quite mean that it has turned into Support yet.
When R is broken you normally have a few scenarios.
The price rallies so strongly that it creates it’s first check-point or S way above the just broken R, so the initialy broken R isn’t even considered in this case, untill future revisits.
The price breaks, pops it’s head up and out of the hole to see how things are looking above and if its clear of predators, it pops back down to test if R is willing to become S, if R holds you have your new S and this is probably the best way to solidify the break. It’s like the price sets a progress marker.
Imagine you were lost in the woods, you’d leave some sort of a marker every time you advanced wouldn’t you ? This way if you came back to the same point again you would know you’d been here before and turn away, you’d know exactly where you were and where you had to go next.
Can you imagine a price moving only upwards, or only downwards ? - well sure you can but it moves both up and down and when both sides moving the price start fighting off, it moves sideways because neither will let the other take control.
So when we break R, its like a rabbit coming out of its hole… it looks around if everythings good it goes back down and lets everyone else know its clear so they can all weeeeeeeee outside together and with greater confidence.
But imagine the rabbit saw a wolf… wud it not run like a mofo so fast back down the hole that it wud proly dig further down just to feel safer and slow its heart rate ? I wud lol
There is too much psycology in it to give a straight answer, you need to clear you mind and think logically.
What do you feel when you are trading and you’ve got a long and you break R… ?
You will probably be telling yourself:
A: "Man its probably not gonna hold R (now S), its probably gonna go back down, i should short now " outcome: you sell and help push the price down by about a microscopic fraction
B: “Yeah! We finaly broke R, this baby is comiiin up, yeeehaawww” outcome: you hold your position, in fact you’re so hyped and sure about your analysis that you even decide to add to your current long position and you help move the price up by a microscopic fraction
C: “You are calm and cool, you know this is a natural market movement and you are holding your position untill you break out of the current range caused by all this hype on both sides” outcome: you are neutral
Just like you, everyone else trading is a human too.
Now imagine all these emotions multiplied by billions upon billions to perfectly synthesize what we call the Forex
What would happen after a break then?
It is all just a fight between two different oppinions all you need to do is think human do your TA right and watch out for the news.
Think about it.
Also as Ram said, it is a very important indicator when a WHOLE candle, wicks and all closes above an important R (or below S if bearish) - you will notice in cases like these that a major fight goes on, bulls buy to help keep the candle over the R before it closes and bears sell to bring it down as much as they can and perhaps back below R before it closes. Either outcome here is a strong indicator for the respective side and many traders only enter their positions after they have a candle close over R or S.