Chapter 13. Breakouts, Stops, and Retracements

Chapter Objectives

By the end of this chapter, you should

• Understand what a breakout is

• Be familiar with the major methods of identifying a breakout

• Be familiar with the purpose of entry and exit stops

• Be familiar with the major methods of setting entry and exit stops

In Chapter 12, “Trends—The Basics,” we discussed the importance of trends for profiting from price action, and we observed several ways in which trends can be recognized. We also learned that to maximize profit, we must join a trend at its earliest, safest point, and ride it until it shows signs of changing direction against us. To do this, we mentioned that a trend will begin often from a breakout of a support or resistance ...

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