4 Crazy Price Action Forex Tips That Will Seriously Improve Your Trading!
4. Time Your Breakout Decisions Carefully
Above: The initial bearish breakout is completely wiped out, and the market actually rallied in the opposite direction for days later.
That’s why we can exploit the fakeout event, and use it as a trade signal.
My theory to why this method is so powerful…
With stops being triggered, there is now less resistance for the market to move in the opposite direction due to an influx of closing trades.
This produces a very powerful ‘aftershock effect’, where price can move great distances on the chart during that session, and beyond.
The event creates an excellent opportunity for us to catch a nice explosive trade – it’s one of my favorite breakout strategies.
If you want you can trade the Asia fakeout directly, or utilize an extension of this setup – which I call the breakout trap and reverse setup.
The breakout trap and reverse system is built off more confirmation:
First we wait for a an Asia fakeout to occur, especially around key technical areas on the chart
We can enter on the ‘aftershock move’ using breakout orders (buy & sell stop orders), at the opposite end of the previous candle’s range.
Breakout trap and reverse moves can be violently explosive and give you very high return on investment. But you will need to hold onto them to milk them for what they are worth.