The basis of this trading is that price historically often either breaks out of a consolidation period, or bounce out of certain levels. Both BO and S&R traders believe in certain price zone where price will either break through or bounce. BO traders take advantage of this by straddling their position on the edges of the consolidation period. S&R traders take advantage of this by trading the price reaction on certain levels, taking into account possible overbought and oversold areas. They rely heavily on the understanding of supply, demand, and volume, what causes the consolidation/S&R levels, what are the indications when breakout/bounce is about to happen, and to which direction will the breakout/bounce go to. They use limited number of indicators as confirmations because they trade mainly with understanding.
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