September 2, 2019

Trading breakouts and breakout pullbacks

Every time when the market breaks out through a certain resistance or support level, there will be a pullback sooner or later. If the price returns to a few pips of the entry point and tests it, this is called a breakout test. The test can happen as soon as the next bar after the breakout, more than 10 bars later, or there can even be several tests of that level.

Breakout tests are important because they provide traders with a relatively reliable entry signal when the test is successful and the trend resumes (a breakout pullback is confirmed).

Basically, when the price breaks out of a trading range, but fails to retain its momentum and later reenters the trading range, it’s called a false breakout (failed breakout, or fakeout). If, however, there is a pullback to the breakout (the price halts around the breakout point, instead of entering


Basics of pullbacks -

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