3/16/2024 0 Comments Bear flag ascending wedge![]() A bear flag can be easily spotted as it makes “higher highs” and “higher lows” within the “flag” area. ![]() They are almost identical to bull flags but in the opposite direction. When spotted, the traders look for an upside breakout in order to enter the market.Ī bear flag usually occurs as markets consolidate during a downtrend. The trend lines connecting these highs and lows are near parallel. ![]() Bull flag patterns can be spotted when the market breaks out from a range and makes “lower highs” and “lower lows” in a tight formation. The price must intersect trend lines at least twice before the pattern emerges.įlags are continuation patterns, indicating a small pause in the market trend. A descending triangle is bound by two trend lines connecting a downward slope trend line and a horizontal trend line connecting the lows of the pattern. Descending triangle forms in bear markets. Traded correctly, this kind of breakouts could be very profitable.ĭescending triangles are similar to ascending triangle pattern. ![]() The triangle prices must intersect the trend lines at least twice before the pattern is completed. The ascending triangle is bound by two trend lines: a horizontal line at the top and a trend line with an upward slope connecting the lower lows. The symmetric triangle can be easily spotted when the price makes alternate lower highs and higher lows in upside and downside slopes, in a symmetry.Īn ascending triangle forms when the market price attempts to make higher highs and lower lows, indicating a bullish price action. That’s the psychology behind why a broken support becomes a resistance level.Ī symmetric triangle occurs when the markets are in indecision mode, usually after a strong trend. Why? Because once you start to lose money after the breakout occurs, one of your first impulses is to exit the market at break even. If a support level is broken, you as a buying trader will become a seller at the same entry price. If the breakout occurs below a support level, that support level becomes a resistance levelĮver wondered why a support once is broken becomes resistance? Because support and resistance levels indicate market prices with significant buying and selling power.If the breakout occurs above a resistance level, that resistance level becomes a support level.Here are the main rules to be followed while trading breakouts: Resistance levels are price levels where traders believe the market is overbought and selling strong enough to overcome buying power, determining the market to decrease.Support levels are price levels where traders believe the market is oversold and buying power is strong enough to overcome selling pressure, determining the market to increase.Support and resistance play an important role in breakout trading. If you want to be successful while trading breakouts, you better focus your efforts on support and resistance. An increasing volatility or movement against the breakout rally suggests that the initial breakout may be false. In breakout trading, we normally want the volatility to be in one direction only : the direction of the breakout rally. The market will eventually move, either up or down. No market can stay in consolidation phase forever. The principle behind breakout trading is simple. By combining trend trading with breakout trading we can generate decent trading opportunities, on virtually all market conditions. This trading technique works well in a trending market which consolidates after a strong rally. The main advantage of the breakout trading is the fact we don’t have to wait for days or weeks of price activity to confirm our moment of entry. This technique is quite flexible, as it can be traded on all charts, from the 1-min to the weekly chart. This method is used by scalper traders, swing traders, day traders and also by position traders. SELL, if the breakout occurs below a support levelīreakout trading can be implemented in almost all trading styles.BUY, if the price broke a resistance level.It’s important to know how to detect these periods of consolidation and how to profit from the price fluctuations after a breakout occurs.Ī breakout represents a price movement after a period of consolidation, often characterized by increasing volume and volatility.īasically, traders look for a breakout after a period of consolidation in order to: Lots of stop orders are being triggered during this consolidation phases. When the market isn’t trending and moves sideways many traders are caught off guard.
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