what is the best way to avoid fake breakouts in support and resistance

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Hello,

I'm trying to build a breakout trading bot with support and resistance and i want to avoid fake breakouts.

How do I go about it?

 

Forum on trading, automated trading systems and testing trading strategies

Asi trendline strategy!

Sergey Golubev, 2011.03.26 10:47

As I remember from the theory (which I also used in practics) - trendlines (and any support resistance lines) can be fake broken 2 times before real breakout, or just ... without breakout.

This "2 times" are written in many sources and it is well-known situation: almost everyone who is trading support/resistance or using it for some analysis - knows it. I also used this theory when trading maksigen for example.

So, to say that if the price broke trend line by next/previous candle (for the first time for examole) and because of that we can consider it as a buy or sell signal - it is totally not true/wrong.

Just practical evaluation.


 

Forum on trading, automated trading systems and testing trading strategies

Market Condition Evaluation based on standard indicators in Metatrader 5

Sergey Golubev, 2013.01.31 16:30

Why false breakout? Look at the image (this is Merrill's patterns for downtrend):

 

and look at GBPUSD M1 chart for now:

 

So, the pattern on GBPUSD chart is same as M3 Merrill, right? And the evolution of this M3 pattern was on the following way: M8 - M4 - M3. That is why it was false breakout.

 


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