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Breakout & Retest Strategy
Breakouts occur in all types of market environments. Typically, the most explosive price movements are a result of channel breakouts and price pattern breakouts such as triangles, flags, or head and shoulders patterns. As volatility contracts during these time frames, it will typically expand after prices move beyond the identified ranges.
Regardless of the timeframe, breakout trading is a great strategy. You can apply this strategy to day trading, swing trading, or any style of trading.
Retests can occur on a variety of price action patterns. In fact it’s important to always wait for a retest of the broken level. This involves waiting for the retest as well as confirming price action before putting any capital at risk.
Breakout & Retest Strategy
Breakouts occur in all types of market environments. Typically, the most explosive price movements are a result of channel breakouts and price pattern breakouts such as triangles, flags, or head and shoulders patterns. As volatility contracts during these time frames, it will typically expand after prices move beyond the identified ranges.
Regardless of the timeframe, breakout trading is a great strategy. You can apply this strategy to day trading, swing trading, or any style of trading.
Retests can occur on a variety of price action patterns. In fact it’s important to always wait for a retest of the broken level. This involves waiting for the retest as well as confirming price action before putting any capital at risk.
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Rising Wedge
This usually occurs when the price has been rising over time, but it can also occur in the midst of a downward trend as well.
The trend lines drawn above and below the price chart pattern can converge to help a trader or analyst anticipate a breakout reversal. While price can be out of either trend line, wedge patterns have a tendency to break in the opposite direction from the trend lines.
Traders can make bearish trades after the breakout by selling the short or using derivatives such as futures or options .
Rising Wedge
This usually occurs when the price has been rising over time, but it can also occur in the midst of a downward trend as well.
The trend lines drawn above and below the price chart pattern can converge to help a trader or analyst anticipate a breakout reversal. While price can be out of either trend line, wedge patterns have a tendency to break in the opposite direction from the trend lines.
Traders can make bearish trades after the breakout by selling the short or using derivatives such as futures or options .
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Falling Wedge
When the price has been falling over time , a wedge pattern can occur just as the trend makes its final downward move. The trend lines drawn above the highs and below the lows on the price chart pattern can converge as the price slide loses momentum and buyers step in to slow the rate of decline. Before the lines converge, the price may breakout above the upper trend line.
When the price breaks the upper trend line, it is expected that the trend will change and go up.
Traders who identify bullish reversal signals will want to look for trades that will benefit from price increases.
Falling Wedge
When the price has been falling over time , a wedge pattern can occur just as the trend makes its final downward move. The trend lines drawn above the highs and below the lows on the price chart pattern can converge as the price slide loses momentum and buyers step in to slow the rate of decline. Before the lines converge, the price may breakout above the upper trend line.
When the price breaks the upper trend line, it is expected that the trend will change and go up.
Traders who identify bullish reversal signals will want to look for trades that will benefit from price increases.
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Rounding bottom
A rounding bottom is a chart pattern used in technical analysis and is identified by a series of price movements that graphically form the shape of a "U". Rounding bottoms are found at the end of extended downward trends . This pattern's time frame can vary from several weeks to several months and is deemed by many traders as a rare occurrence. Ideally, volume and price will move in tandem.
The transfer to an upward trend occurs when buyers enter the market at a low price, which increases demand . Once the rounding bottom is complete, the price breaks out and will continue in its new upward trend. The rounding bottom chart pattern is an indication of a positive market reversal, meaning investor expectations and momentum are gradually shifting from bearish to bullish.
Rounding bottom
A rounding bottom is a chart pattern used in technical analysis and is identified by a series of price movements that graphically form the shape of a "U". Rounding bottoms are found at the end of extended downward trends . This pattern's time frame can vary from several weeks to several months and is deemed by many traders as a rare occurrence. Ideally, volume and price will move in tandem.
The transfer to an upward trend occurs when buyers enter the market at a low price, which increases demand . Once the rounding bottom is complete, the price breaks out and will continue in its new upward trend. The rounding bottom chart pattern is an indication of a positive market reversal, meaning investor expectations and momentum are gradually shifting from bearish to bullish.
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What is Divergence ?
#Divergence is when the price of an asset is moving in the opposite direction of a technical indicator, such as an oscillator, or is moving contrary to other data. Divergence warns that the current price trend may be weakening, and in some cases may lead to the price changing direction.
What is Divergence ?
#Divergence is when the price of an asset is moving in the opposite direction of a technical indicator, such as an oscillator, or is moving contrary to other data. Divergence warns that the current price trend may be weakening, and in some cases may lead to the price changing direction.
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Triple Bottom
A triple bottom pattern shows 3 different small lows at around the similar amount. The triple bottom is regarded to be a difference of the head and shoulders bottom. Like that pattern, the triple bottom is a reversal pattern.
The only option which distinguishes a triple bottom from a head and shoulders bottom is the lack of a “head” between the two shoulders. The triple bottom shows a downtrend in the procedure of becoming an uptrend. It is, therefore, vital to the validity of the pattern that it commence with prices moving in a downtrend.
Triple Bottom
A triple bottom pattern shows 3 different small lows at around the similar amount. The triple bottom is regarded to be a difference of the head and shoulders bottom. Like that pattern, the triple bottom is a reversal pattern.
The only option which distinguishes a triple bottom from a head and shoulders bottom is the lack of a “head” between the two shoulders. The triple bottom shows a downtrend in the procedure of becoming an uptrend. It is, therefore, vital to the validity of the pattern that it commence with prices moving in a downtrend.
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Inverse Head And Shoulders
The inverse head and shoulders chart pattern is used to predict the reversal of a downward trend. It is also sometimes called the “head and shoulders bottom” or even a “reverse head and shoulders,
traders can draw a neckline between the shoulders and the head – the two peaks between the low points- showing that prices are likely to rise.
Once the pattern completes itself and the neckline has been broken, traders can determine profit and price targets.
Inverse Head And Shoulders
The inverse head and shoulders chart pattern is used to predict the reversal of a downward trend. It is also sometimes called the “head and shoulders bottom” or even a “reverse head and shoulders,
traders can draw a neckline between the shoulders and the head – the two peaks between the low points- showing that prices are likely to rise.
Once the pattern completes itself and the neckline has been broken, traders can determine profit and price targets.
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Triple Top
Three consecutive, roughly equal peaks which may at first resemble a double top. These peaks represent failed attempts to break through an area of resistance. Each test of resistance is typically accompanied by decreasing volume, until a breakout in price occurs with an increase in volume. It occurs after an extended uptrend and often represents a reversal pattern that indicates a minor, if not long term, change from an uptrend to a downtrend . Trading volume trends should also be employed to confirm the strength of the signal.
Place a SELL order when the price breaks through the support line and completes the pattern.
Triple Top
Three consecutive, roughly equal peaks which may at first resemble a double top. These peaks represent failed attempts to break through an area of resistance. Each test of resistance is typically accompanied by decreasing volume, until a breakout in price occurs with an increase in volume. It occurs after an extended uptrend and often represents a reversal pattern that indicates a minor, if not long term, change from an uptrend to a downtrend . Trading volume trends should also be employed to confirm the strength of the signal.
Place a SELL order when the price breaks through the support line and completes the pattern.
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OBV (On Balance Volume)
On Balance Volume is a volume indicator that uses trading volume to predict if a price will change.
The idea behind OBV is that the trading volume impacts the price and can serve as a powerful tool to decide if a trend will last or not. On top of that, OBV also offers clues as to what type of participants are trading in the market. For instance, if the volume increases and the price remains flat, it could imply that institutions or more sophisticated players are buying assets from retail traders only to then sell them back as soon as the price goes up.
Unlike for the RSI, numerical values aren’t important to generate signals with the OBV because it’s a momentum indicator. The slope and its direction provide more insight than the absolute value. Broadly speaking, when the volume on up days is outpacing the volume on down days, we can expect an asset to follow the move up eventually. The steeper the slope, the stronger the trend.
OBV (On Balance Volume)
On Balance Volume is a volume indicator that uses trading volume to predict if a price will change.
The idea behind OBV is that the trading volume impacts the price and can serve as a powerful tool to decide if a trend will last or not. On top of that, OBV also offers clues as to what type of participants are trading in the market. For instance, if the volume increases and the price remains flat, it could imply that institutions or more sophisticated players are buying assets from retail traders only to then sell them back as soon as the price goes up.
Unlike for the RSI, numerical values aren’t important to generate signals with the OBV because it’s a momentum indicator. The slope and its direction provide more insight than the absolute value. Broadly speaking, when the volume on up days is outpacing the volume on down days, we can expect an asset to follow the move up eventually. The steeper the slope, the stronger the trend.
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How to draw trend line ?
A trendline is a charting tool used to determine the market's direction by connecting prices using support or resistance. A trendline can also be seen as a straight line that joins two lower highs or higher highs.
Drawing trend lines comes with a few rules
A trendline should connect a minimum of 2 swing tops or bottoms, more touches means it’s stronger.
A trendline should not cut through a candle or candles.
A trendline can only be based on closed the candle .
To draw an uptrend line, you start with a swing low on the left-hand side of the chart and connect it to a higher swing low.
To draw a downtrend line, you begin with a swing high on the Lefthand side of the chart and connect it to a lower swing high.
Trend following is a trading strategy that buys when the price is rising and sells short when the price is falling.
How to draw trend line ?
A trendline is a charting tool used to determine the market's direction by connecting prices using support or resistance. A trendline can also be seen as a straight line that joins two lower highs or higher highs.
Drawing trend lines comes with a few rules
A trendline should connect a minimum of 2 swing tops or bottoms, more touches means it’s stronger.
A trendline should not cut through a candle or candles.
A trendline can only be based on closed the candle .
To draw an uptrend line, you start with a swing low on the left-hand side of the chart and connect it to a higher swing low.
To draw a downtrend line, you begin with a swing high on the Lefthand side of the chart and connect it to a lower swing high.
Trend following is a trading strategy that buys when the price is rising and sells short when the price is falling.
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Horizontal Lines
In technical analysis, a horizontal line is often drawn on a price chart to highlight areas of support or resistance.
The horizontal line is drawn by connecting similar swing lows in price to create a horizontal support line. For a horizontal resistance line, similar swing highs are connected.
The Difference Between a Horizontal Line and a Trendline
Both these terms could refer to the same thing: drawn lines on a chart. While a horizontal line is specifically horizontal, a trendline is typically angled and drawn along rising swing lows during a price uptrend or drawn along dropping swing highs during a downtrend.
A horizontal line is not an actual barrier for price. It is a technical tool which may help traders determine whether they should be more bearish or bullish.
Where a horizontal line is drawn is subjective. Not all traders may place the horizontal line at the same price.
Horizontal Lines
In technical analysis, a horizontal line is often drawn on a price chart to highlight areas of support or resistance.
The horizontal line is drawn by connecting similar swing lows in price to create a horizontal support line. For a horizontal resistance line, similar swing highs are connected.
The Difference Between a Horizontal Line and a Trendline
Both these terms could refer to the same thing: drawn lines on a chart. While a horizontal line is specifically horizontal, a trendline is typically angled and drawn along rising swing lows during a price uptrend or drawn along dropping swing highs during a downtrend.
A horizontal line is not an actual barrier for price. It is a technical tool which may help traders determine whether they should be more bearish or bullish.
Where a horizontal line is drawn is subjective. Not all traders may place the horizontal line at the same price.
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Fibonacci Retracement
Fibonacci retracement is a method of technical analysis for determining support and resistance levels. ratios provide price levels to which markets tend to retrace a portion of a move, before a trend continues in the original direction.
A Fibonacci retracement forecast is created by taking two extreme points on a chart and dividing the vertical distance by Fibonacci ratios. 0% is considered to be the start of the retracement, while 100% is a complete reversal to the original price before the move. Horizontal lines are drawn in the chart for these price levels to provide support and resistance levels. Common levels are 23.6%, 38.2%, 50%, and 61.8%.
Fibonacci Retracement
Fibonacci retracement is a method of technical analysis for determining support and resistance levels. ratios provide price levels to which markets tend to retrace a portion of a move, before a trend continues in the original direction.
A Fibonacci retracement forecast is created by taking two extreme points on a chart and dividing the vertical distance by Fibonacci ratios. 0% is considered to be the start of the retracement, while 100% is a complete reversal to the original price before the move. Horizontal lines are drawn in the chart for these price levels to provide support and resistance levels. Common levels are 23.6%, 38.2%, 50%, and 61.8%.
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Momentum
Momentum is one of the more important indicators that the price will continue in the same direction. We speak of a momentum candle when the candle is comparably larger than the candles that precede it. Often, momentum candles will close strong, meaning that there is little to no wick when the candle closes.
In the example, you can see how price initially contracts: small candles with a narrow range of motion. All of a sudden, we can see a bullish momentum candle: much larger than the previous candles and with a strong close. This candle also crossed the moving average, and as you can see, it triggered the start of a new uptrend.
Momentum
Momentum is one of the more important indicators that the price will continue in the same direction. We speak of a momentum candle when the candle is comparably larger than the candles that precede it. Often, momentum candles will close strong, meaning that there is little to no wick when the candle closes.
In the example, you can see how price initially contracts: small candles with a narrow range of motion. All of a sudden, we can see a bullish momentum candle: much larger than the previous candles and with a strong close. This candle also crossed the moving average, and as you can see, it triggered the start of a new uptrend.
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What is a Golden Cross?
A Golden Cross is a basic technical indicator that occurs in the market when a short-term moving average (50-day) of an asset rises above a long-term moving average (200-day). When traders see a Golden Cross occur, they view this chart pattern as indicative of a strong bull market.
What is a Golden Cross?
A Golden Cross is a basic technical indicator that occurs in the market when a short-term moving average (50-day) of an asset rises above a long-term moving average (200-day). When traders see a Golden Cross occur, they view this chart pattern as indicative of a strong bull market.
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What Is a Stop-Loss Order?
A stop-loss is designed to limit an investor's loss in a security position. For example, setting a stop-loss order for 10% below the price at which you bought the coin will limit your loss to 10%. Suppose you just purchased Bitcoin at $20K . Right after buying the bitcoin, you enter a stop-loss order for $18K . If the price falls below $18K , your Bitcoins will then be sold at the prevailing market price.
What Is a Stop-Loss Order?
A stop-loss is designed to limit an investor's loss in a security position. For example, setting a stop-loss order for 10% below the price at which you bought the coin will limit your loss to 10%. Suppose you just purchased Bitcoin at $20K . Right after buying the bitcoin, you enter a stop-loss order for $18K . If the price falls below $18K , your Bitcoins will then be sold at the prevailing market price.
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What is Divergence?
Divergence can be seen by comparing price action and the movement of an indicator. Price & RSI should move hand in hand, If they are NOT, that means price and the RSI are diverging from each other. And that's why it's called "divergence." Using divergence trading can be useful in spotting a weakening trend or reversal in momentum. Sometimes, you can even use it as a signal for a trend to continue!
What is Divergence?
Divergence can be seen by comparing price action and the movement of an indicator. Price & RSI should move hand in hand, If they are NOT, that means price and the RSI are diverging from each other. And that's why it's called "divergence." Using divergence trading can be useful in spotting a weakening trend or reversal in momentum. Sometimes, you can even use it as a signal for a trend to continue!
#Educational
Fibonacci Retracement
Fibonacci retracement is a method of technical analysis for determining support and resistance levels. ratios provide price levels to which markets tend to retrace a portion of a move, before a trend continues in the original direction.
A Fibonacci retracement forecast is created by taking two extreme points on a chart and dividing the vertical distance by Fibonacci ratios. 0% is considered to be the start of the retracement, while 100% is a complete reversal to the original price before the move. Horizontal lines are drawn in the chart for these price levels to provide support and resistance levels. Common levels are 23.6%, 38.2%, 50%, and 61.8%.
Fibonacci Retracement
Fibonacci retracement is a method of technical analysis for determining support and resistance levels. ratios provide price levels to which markets tend to retrace a portion of a move, before a trend continues in the original direction.
A Fibonacci retracement forecast is created by taking two extreme points on a chart and dividing the vertical distance by Fibonacci ratios. 0% is considered to be the start of the retracement, while 100% is a complete reversal to the original price before the move. Horizontal lines are drawn in the chart for these price levels to provide support and resistance levels. Common levels are 23.6%, 38.2%, 50%, and 61.8%.