Here is some additional advice to breakout trading: 1. Before entering the market be sure that beyond the border that you expect will be broken there are no strong areas of support/resistance, targets or oversold/overbought areas. They could lead to fake outs – as on chart #4. 2. Apply all tools that you know to make as safe an entry as possible and place as close of a reasonable stop as possible. This could be trend, oversold/overbought, patterns etc. Say, if the market shows upper breakout but hits overbought – there is great probability that this break will fail. Especially if it has formed a bearish engulfing pattern on the next day after the breakout (in terms of the daily chart). 3. Despite the way of entry you choose – you never know with certainty if the move will continue or not. 4. It’s better to stay aside of breakout trading during news or macro data releases, while this is not your trading strategy. Because this is really doom and gloom environment that leads to multiple spikes, fake outs and volatility increasing. So – always keep an eye on macro data time & date schedule. Estimation of market sentiment with Pivot points Well, partially we’ve talked about it already. So let’s shortly repeat the most important thoughts: 1. There is great probability that the market will touch the Pivot point during the trading period – WPP during the week and MPP during the month. We can say, that market tends to pivot’s first touch; 2. In the beginning of the period (week or month) – look how the market will behave around the pivot. If market flirts with it, moves above and holds – sentiment is bullish, otherwise – bearish; 3. Sentiment in the beginning of the period does not mean that it should hold constant during whole period. It could change, for example due to some data release; 4. Keep in mind the overall market environment. Let’s suppose that market’s solid long-term trend on daily chart. It means that usual price action – pivot touch & go. If it has not happened and market moved below pivot during current week – it does not mean that trend has been broken. It just tells us that that possibly the market has turned to deeper retracement to WPS1. The same is true for downtrend and WPR1. Here you should apply our rules 5,6,7, 11 and 14; 5. Don’t make application of Pivot too simple. This is not the rule as “market above the pivot – buy, and below pivot – sell”. Use it as a part of overall analysis. P.S. This lesson was written by Sive Morten, who has been working for a large European Bank since April of 2000, and is currently a supervisor of the bank's risk assessment department. Sive's knowledge of forex market and banking industry is vast and quite complete. If you have any specific questions about forex, banking industry, or any other financial instruments, please post them on the next page and Sive should answer soon. Note: FPA ranks are earned in the battles against scam, not in the classroom.