Keys to Intraday Breakouts
When trading intraday breakouts, or when engaging in any type of trading, for that matter, it is important for the trader to use every type of advantage possible. We want to search for situations in which the odds are in our favor, and then take action.
In all forms of trading, no matter if the vehicle is in the equity, futures, or forex market, there are many instances of false breakouts. A false breakout occurs when the price appears to break below support or above resistance, only to rise back above support or fall back below resistance.
In order to reduce the negative effects of these false breakouts, and to improve our chances of success, let’s take a closer look at intraday breakouts and how to trade them.
ASCENDING AND DESCENDING TRIANGLES
Ascending and descending triangles create excellent intraday breakout opportunities, because the pattern itself establishes a directional bias for the currency pair. An ascending triangle is formed by a combination of diagonal support and horizontal resistance (Figure 11.1
), while a descending triangle is formed by a combination of diagonal resistance and horizontal support (Figure 11.2
In the case of an ascending triangle, the bulls are gaining strength and buying at higher and higher levels, while the bears are merely trying to defend an established level of resistance. Since the bulls are more aggressive than the bears, they are more likely to prevail in this battle. The odds favor a breakout ...