Translated from Russian by Google Translate
2 Сентябрь 2009

Analyze the nature of false breakouts

False breakouts in the currency market - a phenomenon often enough, so furious dynamics of Forex market can not remain permanently in the zone of control. Frequent mood swings, the fundamental factors that influence the currency market - all this suggests that forex analyst in this case should be particularly rigorous. But certainly worth noting that the FX market can never plan with absolute precision, so the task of the analyst will be to establish acceptable levels of deviation of the price range of current trend lines.


Quite often there are situations when, apparently, absolutely predictable situation, the price is in line with forecasts, but unobtrusive factors point to the possibility of major changes. And if you ignore these factors, even excellent evolving situation may suffer a complete fiasco. What does this mean? This suggests that in any case should never ignore the rules of money management, forex analyst without the use of risk management strategy is dead. And this factor must be taken into account.

Trading breakouts - this is pure risk management strategy. It can be said for the reason that breakthroughs occur in precisely those areas where there is a large concentration of opposing forces. All the opposing sides are trying to play according to their preferences, but no one knows, is there enough strength in his group in order to make meaningful price movement. It is for this reason, no matter what the figures were not formed near the projected gaps, they can not give us one hundred percent guarantee of the situation according to plan. Consequently, each trader, for whom forex analyst is a means of forecasting the development of the situation, should try best to act cautiously in such circumstances.

Typically, after the occurrence of breakouts situation may emerge in one of three possible scenarios:

1. The rapid rise of prices and the continued movement in a given direction. In this case, all traders appears excellent chance to earn a sharp continuing trend

2. Fast rise and a sharp price reversal. This version of the situation quite dangerous, as most traders take positions in the direction of the breakout

3. This scenario is the most dangerous situation, because the price may initially indicate movement in any direction, luring traders into a trap, and then abruptly turn around and go in the opposite direction

But we, as traders who are interested, above all, a strategy of action in similar situations, such a forex analyst, which will bear fruit and enable us not only to save their money, but also make a profit. Successful breakthrough that can predict, must be accompanied by the following factors:

1. Breakthrough of the resistance line. This breakthrough should be accompanied by a large volume. It lasts as long as it lasts interested buyers. After this level of activity begins to subside

2. This stage is called the stage of the rollback. At that point the interest of many buyers cold, the price slips back, many are beginning to sell, resulting in the market is observed the first wave of the rollback.

3. The decline in prices generates interest among new buyers, who are beginning to enter the market at the level of resistance, resulting in price given a new impetus and soars above the previous level

But in this case must take into account some special features. First of all, it concerns the volume. In the first stage, the amount should reflect the advantage of buyers over sellers. In the stage of correction should be observed for some dry volume. At such a moment in the market must enter the new buyers. All forex analyst in this case is based on an assessment of the market. In order not to lose their money when the market moves according to the second and the third scenario described above, must determine whether the balance is not upset the dynamics of supply and demand.

The script for the situation on the foreign exchange market when there is a quick turn, can often adversely affect the traders. Voltage, which is observed in areas with the largest concentration of forces, can play a cruel joke with your deposit. Is therefore necessary to take into account some features of fast turns. First of all, it must know that a quick turnaround.

Rapid spread of the market - this is such a course of development of the situation, when the price is vibrating through the line resistance and support. Basically, swing trading involved traders who chose to trade in a way - a swing trading (swing trading). But even for such traders rapid reversals can cause loss of money. One of the major reasons why the price makes a quick U-turn - is an attempt of the most influential members of the currency market to disrupt the protective order so the other participants.

In the case when the market there is a breakthrough forex analyst should be to determine the mood of the market. If the majority of participants are configured identically, and the market there is a systematic rise or fall, then in that case you can go to the market. When a small lull in the breakout begins to push some players hesitant to close the positions, it could push the price back to the level of breakthrough, ie, to the line of support or resistance.

The important point is to analyze the behavior of the market at the time of fast turns. If, after the break up in the market have been several short-term reversals, which over time have been suppressed, it will be a clear sign of good support from the bulls, and can be viewed as a good signal for opening long positions.

But it is always worth remembering that the most significant reversals occur precisely when one party is broken, therefore, the other will be in an advantageous position and, as a consequence, there are great opportunities for action on key breakout levels. This is where most needed and quality of the forex analyst. But these levels are the starting point for the commission of profitable transactions.