Trednline Breakout Confirmation?

Beginner Questions
1

Hi,

Can someone tell me what is the most used confirmation that a trendline has being broken e.g when the candle closes outside the trendline etc

Any input would be great

Thanks

2

Like so much in FX there is no universal answer to questions like this for traders. Analysts do conform to systems that define these things but in trading everything has pros and cons. At the end of the day a trendline is nothing more than something you think you see on a chart (remember the market does not know or care about what you see). If it helps your trading to define a break as a push through, close through, 2 closes through, close through in line with higher frame trend etc etc then use it

3

I would say a close outside the trendline with volume confirming (or shape of candle confirming) would, for me, be a pretty valid signal that tl has been breached. A close outside, a few pips beyond, but light volume, indeterminate candle, would be a weaker signal. Another thing to watch is where trendlines intersect with other key s/r points like Weekly, Monthly R1, S1 etc.

4

I personally look for a close on other side , Then a retrace towards trendline then continuance in direction past close of first breakout candle. this serves me pretty well. But I am looking at short time frame 15 min… might be different on longer times…

                                           Good Luck  Ken
5

Good point, Ken, a re-test of the line is another strong confirmation.

6

All of the previous answers are good ones. Just pick one, and stick with it. It does not matter which one you pick, you will have losing breakout trades and winning breakout trades. Just keep a tight stop.

If you are exercising proper risk management, you can have 50% or more losing trades and still be a wildly profitable trader. If you get slapped one time because you chose a breakout method, dont skip the next one or try changing the way you spot a breakout, stick with it. You will profit over the long run.

If you are interested in being a breakout trader, might I recommend some reading material:

Way of the Turtle by Curtis M. Faith, 2007 McGraw Hill

7

When talking about breakout trades, there are a few points need to be clarified.

  • In what timeframe (the longer the timeframe, the more profound the breakout)
  • Profit target (short term trade or long term trade)
  • Risk.(most of the time breakout does pull back, your risk will be used to set the entry point of the trade).

I personally use a 5 pip breakout system to make short term trades. If you are interested in the detail, checkout my blog.

good luck!

Matt

8

Thanks everyone for your help.

9

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