When resistance broken in an up trend, can candlestic use to confirmentry for conservation break(i.e pullback) ? secondly, how ruly we know if support or resistance is broken?
Yes, what you are saying is possible if I understand correctly.
But there is a catch. It takes hundreds of hours of screen time to trade pullbacks successfully. At first, your win rate will probably be 50% - same as a coin flip. But with more experience it should reach 60 - 65%. The best advice I can give to a beginner is be careful trading the first pullback. The second one is generally better odds. Never trade the third or fourth one.
I learned a lot from this thread on FF. Only the first 100 pages are relevant. After that the usual rot and nonsense started to appear. Hope this helps.
You need to backtest it and find out.
Hi.
What you are asking is this.
Is there a solid 3 step process to confirm a breakout? Short answer, no.
There is no 3 step process of confirming a breakout. What you need are tools and methods to suggest enough evidence that a breakout has happened. Look for:
(The below strategies are for breakouts if above the resistance line)
Increased volume at breakout
Increase in volume leading up to breakout
Close above resistance
The market holds above the breakout for more than a day
MACD cross overs in conjunction with other methods
Bullish Engulfing Pattern
Gap Ups (not likely in forex market)
Bullish candlesticks
No bearish candlestick formations that close above the resistance line
Volume is great because its a true indicator that market participants are actually buying into a breakout.
Breakout points are major support and resistance levels, and charting formations. When you dig deep to the bottom line, what you are really trading is psychology. A support and resistance zone, or charting formation tell a story about the bias nature of all market participants and what they are thinking about a certain price level. An obvious reversal head and shoulders pattern tells a story about how the prior trend is reversing and the bias of the entire market is now shifting. If in an uptrend and a reversal head and shoulders pattern occurs the 2nd shoulder will tell the story about how the buyers couldn’t make a new high and a break below the neck line puts the sellers in favour of a major down move.
This area is significant because a lot of market participants are looking at that area or price. Since a lot of market participants are looking at that level, upon breaking out a rush of orders will enter the market causing it move in a rush. Once the market has moved upon breakout, a lot of other market participants will begin to see that it has broken out and will start to order trades pushing the market even further and causing the market to rally.
Using the combination of the Bullish Engulfing pattern and the MACD a Breakout can be confirmed which will allow profitable trades and a rally could also be seen in the markets 