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Chapter 20, Part II. Trading Breakouts. Page 2

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 21, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

    Aug 28, 2009
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    Usually we can speak about abreakout only when we see some rectangle or sideways consolidation on the market. So, continuation breakout is one in the direction of the previous trend that was going on before consolidation. In that case, consolidation means that the market participants take some pause to reassess the trend on the market. If they come to a decision that the current trend is correct, then we will see a continuation breakout:

    Chart #1 | 15-min EUR/USD examples of continuation breakouts and ATR (21)

    Pipruit: Cool. But, Sir, during horizontal consolidation we see also a fake out, that looks like a W&R, right?

    Commander in Pips: You’re right, we discussed that previously. But now we will not stop on that, since we speak about continuation breakouts. As you’ve noticed, the first horizontalal consolidation was rather choppy and stopped out a lot of the public, I suppose. Although it still has finished with a continuation breakout, probably we would have wanted to skip it, because it was rather choppy and unclear. ATR also has not shown a solid decrease in volatility. As a result, the truth of potential breakout was under question. But the next consolidation in shape of parallel channel was perfect – a strong decrease in volatility by ATR and no fake outs give us much greater confidence about a strong move in the direction of the breakout. Also, take a look and see that ATR gives you an almost perfect point to enter – when the market shows a small retracement to 1.4430, ATR has reached minimum below 10.
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