Trend channel:
Draw primary trend line and draw secondary trend line parallel to primary line make a trend channel
Trend line break:
Usually price respect trend line and it repels trend line every time and touch and repels but certain situation where trend line breaks occur. specially Economic events or news release, NFP , other special news events . News acts as trigger for breaking trend line. At that time price breaks trend line and new trend start in respect of that time.
Types of break out: · Continuation break out
· Reversal break out
Continuation Breakouts
Sometime price moves in a range and breaks the range in upper limit or lower limit and goes the previous same direction , it is called continuation breakouts. So trend down--à consolidation-àcontinue the previous down trend
If U want to trade in this situation you need to wait till breaking the support and also you need to see the trend strength and weekness to guess the future price movement.
Reversal Breakouts
Reversal breakouts start off the same way as continuation breakouts in the fact that after a long trend, there tends to be a pause or consolidation.
The only difference is that after this consolidation, traders decide that the trend is exhausted and push the price in the opposite or "reverse" direction. As a result, you have what is called a "reversal breakout". You catch on quick!
How to spot breakouts:
At first We need to differentiate the breakout from fake out. Usually market breaks out occurs in high volatility condition so we can measure the volatility , secondly we can see the strength of breakout.
How to measure the volatility:
We can use the following indicators for measuring volatility
BB: When there is less volatility the BB constricts and when volatility increases the BB enpands. Its expansion indicates much volatile market
ATR:
Increase Atr value indicate increase market volatility, decrease ATR value indicate decrease volatility.
How can we measure the strength of breakout:
We can use the following indicators to measure the strength of breakout
