| Before you find entry points and place your position, | | | | enthusiasm that often takes place during a breakout, |
| determine a stop-loss strategy and decide where you | | | | because the price moves too fast. Since prices often |
| will get out if things go wrong. What is the potential | | | | retrace part of a move it is a good idea to wait and |
| risk and what is the reward? The rule of thumb is | | | | enter the market as the price moves back to the |
| that you do not enter a trade unless the ratio is at | | | | breakout level. |
| least 3:1. | | | | 3. EMA (Exponential Moving Averages) |
| 1. Breakout | | | | The same principle of retracement can be applied to |
| A breakout represents a trend reversal signal and is a | | | | moving averages. Buy as the price retreats back to |
| good entry point. This is a sudden burst of price | | | | EMA line. |
| movement in a particular direction after a period of | | | | 4. RSI (Relative Strength Index) |
| consolidation. The sentiment in the market has | | | | Sometimes a good low-risk entry-point occurs after |
| changed and the battle between buyers and sellers | | | | the price is oversold. The oversold area is considered |
| has changed, going in favor of the buyers in an | | | | to be below 30 and the overbought area over 70. |
| uptrend and often as a result of positive | | | | It is very important to keep an eye for volume |
| macroeconomic news. The opposite happens in a | | | | trends, since volume should contract as the |
| downward trend. | | | | retracements gets under way. If the volume |
| 2. Breakout / Retracement | | | | expanded during the retracement process, this would |
| It may not always convenient to buy in the | | | | have been a negative sign. |