venerdì 11 luglio 2008

breakout part 3


Here we have a steep uptrend as shown by the price action and our uptrend line. Instead of guessing as to where this dramatic advance in price might end or at what price level is all the supply, we can simply draw an uptrend line by connecting the pivot lows and look to sell short on a breakout (breakdown in this case) of that line. As in the last example, a natural target can be the origin of that rally in price as shown by the dashed red horizontal line on the bottom of this chart.
Keep in mind that the most important part of trading is managing risk properly. We focus on this extensively in class. The focus of this piece was to help with entries as that is the beginning of a good risk averse strategy. The breakout entries discussed are equally appropriate in any and all markets so don't think this is just for Forex. Never forget, whether the candles on a screen represent a chart of stocks, futures, Forex, options, football trading cards, rare coins, or anything traded… They are all just people and price. We would quantify a breakout in price the same way in any and all of these markets. If you are watching the buying and selling of a David Beckham rookie card and you see that the last one available at the current price level just sold, what is about to happen to price?

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