What is a breakthrough and how can I use the breakthrough market to trade?
Unlike the “breakthrough” you experienced when squeezing pimples during adolescence, what we call breakthrough in the trading world is another matter.
When the price gets rid of a certain sideways trend, or out of range, the market may break out later.
Breakthroughs may also be seen when the price crosses a specific price level, such as support and resistance levels, pivot points, Fibonacci levels, etc.
To conduct a breakthrough market transaction, our goal is to enter the market at the moment the price breaks through the market and follow the direction of the market movement until the market volatility disappears.
Volatility, not trading volume
You will notice that unlike trading stocks and futures, you cannot know the trading volume of the foreign exchange market.
For stock or futures trading, the trading volume is very useful for judging the market’s breakthrough market. Therefore, the disadvantage of conducting foreign exchange transactions is that it is difficult for us to use the trading volume data.
Based on this shortcoming of foreign exchange transactions, we are not only relying on good risk management methods, but also need some standards to facilitate our position adjustment when the potential breakthrough market occurs.
If large price fluctuations occur in the short term, the market volatility will be very high.
On the other hand, if price fluctuations are relatively small in the short term, then market volatility is also low.
Although it is very tempting to enter the market when the price fluctuates faster than the bullet, you will also find that you will become more anxious and more stressed because if you make a wrong decision at this time, you will lose A lot of money.
Higher market volatility is what attracts most traders, but it is also this high volatility that also makes many traders lose their lives.
Our aim is to use the volatility of the market to obtain stable profits.
Rather than follow the market mainstream and enter the market when there is huge volatility in the market, it is better to pay more attention to those currency pairs with lower volatility.
In this case, you can arrange your position in advance, when the breakthrough market appears, and the market shows large fluctuations, you can prepare in advance.
Fluctuation measurement method
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.