FOREX THEORY
Fade the Breakout
Fade the breakout you say? Was that
just a typo? Did you mean to say, “trade the breakout”?
Nope!
Fading breakouts simply means
trading in the opposite direction of the breakout.
Fading breakouts = trading false
breakouts.
You would fade a breakout if you
believe that a breakout from a support or resistance level is false and unable
to keep moving in the same direction.
In cases in which the support or
resistance level broken is significant, fading breakouts may prove to be
smarter than trading the breakout.
Keep in mind that fading breakouts
is a great short-term strategy. Breakouts tend to fail at the first few
attempts but may succeed eventually.
REPEAT: Fading breakouts is a great
short-term strategy. It is NOT a great one to use for longer term traders.
By learning trade false breakouts,
also known as fakeouts, you can avoid getting whipsawed.
Trading breakouts appeal to many
forex traders. Why?
Support and resistance levels are
supposed to be price floors and ceilings. If these levels are broken, one would
expect for price to continue in the same direction as the breakage.
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