What is a trendline break and how to trade it?
How to trade breakouts?
There is a breakout when the price crosses an important level. However, not all breakouts are created equal. There are preconditions for a breakout to be considered relevant:
Consolidation before the breakout.
A significant increase in trading volume.
Indicating investors’ enthusiasm to push the price as far as possible.
Regarding consolidation, breakouts often occur after forming a contraction pattern, such as a triangle or a wedge. During these market phases, the volume gradually decreases, and the amplitude of the movements does the same so that the price action evolves in a narrow range.
A sudden increase in volumes, as well as the exit of the price from the range, is often indicative of a new trend forming.How to trade breakouts?
There are different ways to trade breakouts in the stock market, which are more or less aggressive depending on where you open your position.
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1st target killed