Hi everyone,
Please help with understanding a topic from School of Pipsology.
I am reading the topic ‘How to Trade Fakeouts’ and cannot wrap my head around the following statement:
In fading breakouts, always remember that there should be SPACE between the trend line and price.
Maybe I am missing something, but isn’t this the case all the time? We always have some space when we draw a trend line over tops (or bottoms). I googled the keyword ‘trendline’ and in all images I can see that there is space between the price and the trend line.
What spaces are we talking about here? I added some circles in below image which I think are the spaces that are referred to in the topic. Is it correct or I completely missed the point?
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Hi SolidGains,
I had to go IN to the BabyPips course and find this section. After several attempts at reading it - I don’t know what they’re trying to convey here either.
However, I did find something of value there. If price slowly comes up to the trendline and pushes through it - it’s more likely to be a fake out. Hence a better fading opportunity. It should be obvious that a strong candle(s) pushing through is more likely to be a ‘true’ break-out, but I’ve never traded a fake out so it’s not something that i’ve given thought.
I don’t think that this is something that I would worry about too much if I were you. I mean, there’s lots of good opportunities to simply trade from the top of the channel (or bottom - depending on trend direction), and then you aren’t risking trading it like its a fake out and then having it be a real breakout - and trust me, those explode. You don’t want to be on the wrong side of that action.
So, for me - I trade within the channel. Top to bottom, or bottom to top. OR I trade a solid break-out opportunity, strong candles, popping through and the candle “closing” on the outside of the channel. Works best on higher time frames.
Good luck in your trading.
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I thought it was interesting how you can see the channel momentum shift from diagonal, to horizontal…to diagonal again at the very end. I bet it broke out at the end of that channel (that we can’t see) after it had those three failed attempts (but especially the last two). These are all clues of what price will do next if we pay attention to them.
Although, maybe your first impression was correct. I’ve noticed when price is actually going to break out of a channel, it typically starts hugging the wall closest to the direction it is going to break out. So, if we look at your example (below), and see where I have added the red circle…there is less “space” there. Perhaps that is what the folks at BabyPips were referring to.
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I would like to use trend line as well as horizontal line to identifying market breakout, for false break I use candle close method on high time frames (D1 mostly), if any candle close above that level then I follow the new trend.
I also use trend line for my trading. Yes, this is true we always have some space between our trend lines over price. But the trend line is variable. You can’t follow the same trend line for your every trading. To get the clear answer I always try to do a demo trading. I follow the new trend when any candle close above my level. This is my simple strategy for trading.
Thank you for your replies. Maybe you are right. It would be nice if somebody could confirm this point.
Hey @solidgains and @cndlstckchic ,
I really liked 
CSC’s helpful demos and drawings of momentum, explaining why she preferred channels over trendlines. That gave me insight 
I’m new here and I’m also perplexed 
by the school of pips explanation of SPACE and SPEED.
The definitions themselves are easy to understand, but BOTH graphics make ZERO mention of SPACE or SPEED (hence my confusion) This makes it very difficult to spot these occurrences in live trades.
Personally, I thought SPACE meant the areas I put in Orange (Or maybe the area in Blue) below:
Can anyone confirm or shed light on this, please?
