breakout part2

This again is a chart of the EURUSD. The down trend line is drawn once we have two points on a chart which is what is always required when drawing trend lines. Once we have this, we simply draw the line and wait for price to breakout above the line for a long entry. The logic here is that price is trending down because it is at price levels where supply exceeds demand. We want to buy this market when it reaches a price level where demand exceeds supply (more buyers than sellers). Instead of trying to guess at where this might be, the price action on the chart will tell us this if we just wait and watch. When price eventually breaks out above that down trend line, it happens because it has reached a price level where there are more willing buyers (demand) than sellers (supply). This is where we would want to take a low risk entry and buy. While there are many profit taking targets that we cover in class, one logical target for profit is the origin of the decline in price that started the whole downtrend in the first place. This is shown as the dashed red line on the chart above.