I tried to use H4 and we should get the same S&R lines roughly.
Trading the breakout (even though here is still profitable in the strong uptrend)
would normally not be a high probability entry, and also reduced R:R by half.
You would only buy on an uptrend at support and sell in a downtrend at resistance.
This allows you to use a tight stop and increases your potential profits.
Looking at the top around 1.4900 we have the failed breakout I was trying to explain.
You will have two types of traders at this area if they are currently flat looking at this area.
The first will want to sell. They believe that this is the top with several failed breaks higher
and have got into the market short with their SL's above the resistance.
The second is the guys that are looking for the breakout higher.
These guys will place their entry orders above the resistance and their SL's back below the new support.
Now it's down to the big boys to have fun at your expense.
They will first take price up to the resistance triggering shorts.
Then they will push price up through resistance as they know stops lay above.
Whilst pushing through resistance they have ran into a bunch of buy orders.
This has now wiped out anyone shorting the market and just leaves the longs, plus shorters who have now jumped in long.
The liquidity is there to now just put the brakes on and sell into all that fresh liquidity and push the price back through the new support.
This then takes out the longs by hitting stops under support and in one move the big boys have wiped out both sides of the market.
Only in a strong market is it possible to trade breakouts successfully and even then it's not sure.
Fundamentals are of course important as well as market correlations to help determine if the trend is still in your favor.
EUR/USD H4
Trading the breakout (even though here is still profitable in the strong uptrend)
would normally not be a high probability entry, and also reduced R:R by half.
You would only buy on an uptrend at support and sell in a downtrend at resistance.
This allows you to use a tight stop and increases your potential profits.
Looking at the top around 1.4900 we have the failed breakout I was trying to explain.
You will have two types of traders at this area if they are currently flat looking at this area.
The first will want to sell. They believe that this is the top with several failed breaks higher
and have got into the market short with their SL's above the resistance.
The second is the guys that are looking for the breakout higher.
These guys will place their entry orders above the resistance and their SL's back below the new support.
Now it's down to the big boys to have fun at your expense.
They will first take price up to the resistance triggering shorts.
Then they will push price up through resistance as they know stops lay above.
Whilst pushing through resistance they have ran into a bunch of buy orders.
This has now wiped out anyone shorting the market and just leaves the longs, plus shorters who have now jumped in long.
The liquidity is there to now just put the brakes on and sell into all that fresh liquidity and push the price back through the new support.
This then takes out the longs by hitting stops under support and in one move the big boys have wiped out both sides of the market.
Only in a strong market is it possible to trade breakouts successfully and even then it's not sure.
Fundamentals are of course important as well as market correlations to help determine if the trend is still in your favor.
EUR/USD H4