In fact, we can identify breakthroughs with our own eyes. Once you are familiar with the possible signals of the breakout market, you will be able to quickly identify potential trading opportunities.

Technical form

Now, you should develop an observation pattern and recognize the pattern that will send a reverse breakthrough signal. The following are some related graphic forms:

• Double top and double bottom
• Head and shoulders top and bottom
• Triple top and triple bottom

If you need more information, you can review the courses related to the graphic morphology we have mentioned before.

In addition to graphical patterns, there are also tools and indicators that can be used to identify reversal and breakthrough markets.

Trendline

The first way to identify possible breakthrough markets is to draw a trend line on the technical graph. The method is very simple, you only need to draw a straight line along the direction of the current price.

When drawing trend lines, if you can connect the two tops or bottoms of the price, this is the best. The more tops or bottoms connected by a trend line, the stronger the trend line.

So, how do you use the trend line for breakthrough market transactions? When the price touches the trend line, only two things can happen. The price either rebounds from the trend line and continues the previous trend, or breaks the trend line and triggers a reversal. All we need is to make good use of the breakthrough market.

However, it is not enough to judge the breakthrough market based on the trend line alone. Using one or more of the technical indicators we introduced before this lesson can provide you with tremendous help.

As shown in the figure, as the EUR/USD fell below the trend line support, the MACD indicator also showed a weak trend. Combining this information, we have more reason to say that the breakthrough market will suppress the continued decline of the euro/dollar, and we should choose to short the currency pair.
aisle
Another way to identify breakthrough opportunities is to draw trend channels. The drawing method of the trend channel is similar to that of the trend line. The only difference is that after you draw the trend line, you need to draw another line parallel to it.

The channel is very useful because you can identify the breakthrough market on either side of the channel. The method of using the channel is the same as the method of using the trend line, that is, until the price touches a certain channel line, combined with technical indicators to determine the effectiveness of the breakthrough, and then help us make corresponding operating strategies.

As shown in the figure, the MACD indicator issued a strong bearish signal, while the EUR/USD fell below the lower channel. This is a rare short selling opportunity!