Nevhulaudzi rudzani
Member
Trade breakouts with a buildup
You’re probably wondering:
“What is buildup?”
A build-up is a tight consolidation otherwise known as volatility contraction.
And the location where a buildup occurs gives you a BIG clue to where the market is likely to break out.
For example, if there’s a buildup formed at Resistance, the market is likely to breakout higher.
Let me explain…
You know Resistance is an area to short the markets (after all the textbook says buy Support and sell Resistance).
But what if you go short Resistance and the price is still hovering at that area.
What does it tell you?
To an amateur price action trader, they will think Resistance is getting stronger as the price fails to break above it.
But…
To the seasoned price action trader, this is a sign of strength from the buyers.
Why?
Because if there is a strong selling pressure, the price should move quickly away from Resistance.
The fact that price is still at Resistance is telling you there are buyers willing to buy at higher prices — and that’s a sign of strength.
And that’s not all…
When the price breaks above Resistance, it will trigger a cluster of stop-loss (from traders who are short) which fuels buying pressure.
Plus, breakout traders will long the break of the highs which adds strength to the move.
You’re probably wondering:
“What is buildup?”
A build-up is a tight consolidation otherwise known as volatility contraction.
And the location where a buildup occurs gives you a BIG clue to where the market is likely to break out.
For example, if there’s a buildup formed at Resistance, the market is likely to breakout higher.
Let me explain…
You know Resistance is an area to short the markets (after all the textbook says buy Support and sell Resistance).
But what if you go short Resistance and the price is still hovering at that area.
What does it tell you?
To an amateur price action trader, they will think Resistance is getting stronger as the price fails to break above it.
But…
To the seasoned price action trader, this is a sign of strength from the buyers.
Why?
Because if there is a strong selling pressure, the price should move quickly away from Resistance.
The fact that price is still at Resistance is telling you there are buyers willing to buy at higher prices — and that’s a sign of strength.
And that’s not all…
When the price breaks above Resistance, it will trigger a cluster of stop-loss (from traders who are short) which fuels buying pressure.
Plus, breakout traders will long the break of the highs which adds strength to the move.
