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Almost anybody can recognize support and resistance levels on charts. Drawing few lines (vide Fibonacci levels) or triangle is a task that most people can accomplish. But what to do next ? Is the price going to pierce current level or is it going to test it only? Maybe price will only make a short spike and then return to the previous state (false break)?
Many traders aren’t aware that most of price breaking moves are „false breaks”( especially break against current trend) – meaning that price after making break starts moving in opposite direction. Sometimes it can be only price retracement but even though it can trigger tight stop loss orders and change small price retracement into a false break.
How to increase your chances to succeed trading false breaks?
1. View the situation in a wide perspective.
2. Identify trend in higher time frames – most false breaks are against trend
3. Analyze price levels with price canals, trend lines
Why there are false break after all? The old trader’s saying can give us a hint: "Bulls make money, bears make money, but pigs just get slaughtered!". What does it have to do with false breaks? Pigs are considered amateur traders which usually trad…
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aleks1204 avatar
aleks1204 31 Aug.

отлично !!!

Gonchar avatar
Gonchar 17 Sep.

Видно старался!

Faster avatar
Faster 30 Sep.


Vain avatar
Vain 26 Oct.

very good

Nomi avatar
Nomi 14 Nov.

very nice good luck

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4hour or daily chart in Price Action? Part 1As you probably know, each trader has to find harmony between his personality and his trading strategy. It is one of the most important steps on the road to become a stable profitable trader. Several months ago I have decided that Price Action is my method of making technical analysis. Sometimes there is a huge gap between decisions and our trading practice, but it is a topic for another day. EXAMPLE 1 Let's see the daily chart EURJPYIt is a bearish candle - 25 February 2013 What do we see? There is s strong bearish candle as breakdown. Strong engolfing, as we may say in PA's language. I suppose several thousand traders all around world opened short positions on this pair in 61,8% or 82% fibo and set stop loss behind this 25 February's candle. It doesn't matter if several PA's setups won't work on daily charts, of course, but let's ask another question. How we can use this big move to make money in the market?It is time to see 4 hours chart EURJPY during 25 February's session. The 4 hours chart show chance open short position with good relation between risk and profit.We see the false break setup, (i've written some information about t…
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scramble avatar
scramble 18 Apr.

in my opinion combination of timeframe is the only way to make a good technical analysis! so definetly is not just a daily candle giving the direction. but sometimes it is, depending on hourly and weekly setups :)

valentine avatar
valentine 30 Apr.

Why does this article drop in rank so bad? Anything related to price action should be valued :)

zbych avatar
zbych 1 May

Valentine, thanks for support.

Jester avatar
Jester 7 May

IMHO, 4H charts are most useless in trading because of 4H chart reflects nothing in terms of big market players actions. It's just a ... chart. There is nothing new and important which You don't see ant daily and hourly charts. But intraday accumulations and manipulations could be not seen on it. So my choice is daily and hourly. They have valuable info about market forces. Not 4H.

zbych avatar
zbych 7 May

Jester, thanks for your comment. Maybe You are right, but i try read market using 4h charts and on eurusd, or audusd it is interesting. Maybe eurjpy is very special pair, and i want to write about this pair more in next artical. Best regards

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Hi traders! In my first article I would like to focus on an interesting way of determining the leading trend: the false break conception. What is a false break? It is a movement of price: first, price moves beyond certain consolidation and then turns back rapidly, showing that breaking out of consolidation turned out to be a trap for those who followed it. It is a common turn of events: after the negation of a false break the opposite side of the market takes advantage of the situation and a big, dynamic movement of price following the leading trend takes place. What is my understanding of a consolidation? Consolidation is determined through the boxes, where price remains in a relative balance, moving within limit defined by a box for some time, usually between 4 to 8 candles. Consolidation box that precedes the movement of price upwards is painted blue, and the one before the movement downwards is painted orange. I have also put two moving averages: red is calculated on 9 timeframes, blue on 21. My analysis is based on only 4 hour chart. EXAMPLE 1 What do we se on this chart? The moving averages show the uptrend and the box of consolidation got broken downwards. The price m…
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Likerty avatar
Likerty 21 Mar.

Yea, false breakouts usually act as a strong confirmation, just that price needs to overcome middle of the range when it starts to move back in to it.. False breakouts are oportunities for larger players to gahter additional liquidity that lies outside of the range ussualy. So, good article and I compeltely agree with it:)

zbych avatar
zbych 24 Mar.

Efegen, thanks for good words at the begining my contest's way. There were some technical problems with pictures, and now everything is all right.

citikot, thanks for your remarks. The term "stop-hunting" is interesting and shows market is a battle. .

jpmorgan, maybe i don;t understand you remarks. Please write more...

Likerty - thanks, I suppose we think about market in very close way.

Efegen avatar
Efegen 28 Mar.

Now re reading your article, maybe you should try it with larger time frames to see if there are more false breakouts in larger timeframes than shorter time frames.

SpecialFX avatar
SpecialFX 29 Mar.

This kind of strategy has many names (false breakouts, entering in a correction, etc), but it's basically the same thing: you open a position in the direction of a longer term trend, when the price is correcting in the opposite direction during a short term trend. What this teaches us is that we should look at longer time frames, and trade with the trend, because that's the best way to increase your odds. Good article, easy to follow :)

Delossan avatar
Delossan 30 Mar.

I think the best way to make this work is to combine this method with other helpful tools. Good work. +1

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