When trading
in the short and medium term, you should know what the price level breaks are?
What are the methods of dealing with price breaches? How do you know if the
break will succeed or fail and lead the price back to the break point or break
in the case of a reversal of the sale? In this article we will learn how to
deal with the penetration of important price levels, which are often levels of
support and resistance, and how to make sure that this break is successful or
failed by the scientific rules applied in the science of technical analysis.
What is a
fracture?
A break is a
breach of a certain price level, support or resistance or trend line or even
higher price or lower price for the previous candle. In general, every breach
of a price level is called a break, and a break word is called on the price
drop below the support level. A breakout signifies a price rise above
resistance and a reversal below the breached price level again.
Re-test
movement:
Is the
movement that occurs after the break directly in the opposite direction. For
example, when breaking the support level, the price returns again to test the
breakout level, and the retest movement is very important for the short term
traders as the strength or weakness of the retest movement is reliable if the
break will succeed Or it will fail.
- When
the price breaks for example the resistance level of price and the movement of
retesting is very weak compared to the movement of the same fracture, which in
the upward direction in this case is a directional movement (with the trend),
it means that the penetration will succeed at the probability of almost 65% or
perhaps 70% Depending on the strength or weakness of the general direction as
shown in the drawing.
.
There are
fixed rules in which breakage or penetration is supposed to succeed:
• The break candle is strong and the candle tails are
short or prefer not to have tails from the base, which indicates the strength
of the momentum, and therefore the strength of the candle that penetrated or
broke the price level.
• The stronger the candle, the greater the chances of
success.
• In the case of trading on stocks, if the volumes are
twice or more of the previous trading volumes, it means that the fracture by a
large percentage will succeed.
• The directional movement that crosses the price level
must continue and be composed of a number of strong directional candlesticks,
which means further upside if price resistance breaks, or further declines if
the support is breached.
• Whenever a directional movement breaks through a large
number of resistors or supports, that movement is strong. Such as the price
breaching a strong price resistance with the breach of the muffing afridge,
with the breach of the bearish trend line, for example the correction on the corrective
movement.
• If a resistance level is breached, for example, the
candle will spend most of the trading close to its highest price.
• Always feel the urge to trade in the direction of the
break, that is, the feeling that controls you when watching the break or break
is trading with the movement, you feel that you should buy the arrow, for
example, if the price move the highest level of resistance or vice versa in the
case of breaking the call.
• The re-testing movement is weak, and its candles are weak
and free of momentum and the tails are abundant, and most candles are within
the movement of small candles (doji).
There are many other rules, but these rules are
sufficient when puzzling whether the fracture will succeed or not. In general,
all these rules mean in detail the comparison of the fractional movement with
the retest movement. When the directional movement is strong and the resistance
level is broken, for example, the movement that followed is corrective but
weak, which means that the movement is only due to profit taking by the buyers,
Rather than the urgency and strength of selling forces to control the price,
this means that the chances of a break or break are likely to succeed
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