The purpose of breakthrough trading is to enter the market when the price breaks out, and follow the price trend to achieve maximum profit until the price volatility disappears.
Breaking the market means that price fluctuations will be very significant, because it means that the supply and demand structure of the currency pair you are trading has changed.
You will notice that unlike trading stocks and futures, you cannot know the trading volume of the foreign exchange market. In view of this, we need to rely on volatility.
When we are looking for good breakthrough trading opportunities, we are able to take advantage of volatility.
Volatility measures the overall price fluctuations over a period of time. This information can be used to detect potential breakthroughs.
There are some indicators that can help us measure the current volatility of the exchange rate. When we are looking for breakthrough opportunities, using these indicators will help us to a great extent.
☉ Moving average
☉ Bollinger Band
☉ ATR indicator
There are two breakthrough patterns:
☉ Continuous form
☉ Reverse the pattern
To identify the breakthrough market, you can observe the pattern:
☉ Graphic form
☉ Trend line
You can use the following indicators to measure the strength of the breakthrough:
☉ MACD indicator
☉ RSI indicator
Finally, it should be pointed out that with the announcement of relevant major economic data or the occurrence of major events, the emergence of breakthroughs will usually be very effective. Before we decide whether to conduct a breakout transaction, please always check the financial calendar in advance.
Reverse breakthrough transaction
Institutional traders like to conduct reverse breakthrough transactions. Therefore, we must also learn to conduct reverse breakthrough trading.
Do you want to follow the direction of most people, or follow the flow of money?
Most people think the same, eat the same food, sleep at almost the same time, and watch the same movies. If we can adopt the same trading methods as institutional investors, success will not be far away from us.
Reverse breakthrough trading means trading in the opposite direction of the breakthrough transaction. If you think that the price’s breakthrough from a certain support or resistance level is a false breakthrough, and it is difficult to run further along the direction of the breakthrough, you can conduct a reverse breakthrough transaction.
A savvy small group of traders, such as institutional investors and more sophisticated traders, like to conduct reverse breakthrough trading.
Potential false breakouts are usually seen at support or resistance levels formed by trend lines, technical patterns or previous highs or lows.
The ideal answer is in a range volatility market. However, you cannot ignore market sentiment, major news events, common sense, and other market analysis methods.
Most of the time, financial markets are kept within the range to move back and forth, and usually do not deviate too far from highs and lows.
What needs to be emphasized after the group is that when the market has no major economic indicators or events, the probability of false breakthroughs is higher.