Price Action Trading Secrets: 3 Charts for Trendline Breakout Strategy That You Must Watch
Price moves in trends. Massive profits can be made when a trendline is broken in either direction. This is the beauty of the Price Action Trading strategy.
If you are like a tiger on a prowl, wait for the set-up to complete and once your desired pattern is formed, the risk-reward ratio is amazingly in your favour, presenting great opportunities to profit.
Here are the 3 setups for Trend Line Breakout Strategy:
Immediate Breakout Setup
This is a simple and straightforward setup. When a trendline is intersected. When an upward moving trendline is intersected, the trendline is broken. The market moves downwards in most cases. The point to understand here is there are false or fake breakouts that you need to identify and eliminate.
See the above image of DMART, the price breaks down immediately after the long term trendline is broken. The higher the timeframe, the more reliable is the signal.
Therefore, the trendline break on a daily timeframe will be more reliable than the hourly chart.
And, the trendline break on weekly will be more reliable than the daily one.
Trendline Breakout Sell Set up
This tread set-up is not that easy to master and you need to be a bit careful. After breaking the trendline, the price starts going downward, then retraces, and tests the trendline it just broke and then finally pulls back.
Here is the chart of Tata Motors on the weekly time frame. The downtrend ends and suddenly it starts moving upwards.
In most cases, it crosses the trendline and retraces to touch the support and then starts moving upwards.
These chart setups look very simple and easy money-minting way, the reality is starkly opposite: most of the breakouts are in reality fake that you need to filter.
Trendline Breakout Buy Set up
This is quite a simple and straightforward set-up where the downtrend is clearly and convincingly broken by an upside move.
Here is the chart of Tata Motors on the weekly time frame. The downtrend ends and suddenly it starts moving upwards.
In most cases, it crosses the trendline and retraces to touch the support and then starts moving upwards.
These chart setups look very simple and easy money-minting way, the reality is starkly opposite: most of the breakouts are in reality fake that you need to filter.
