A very classic and powerful trading strategy called "Pullback After Breakout Entry."
A simplified and detailed explanation of what happens on the chart:
1. The Concept (The Concept)
Instead of buying immediately after the price breaks the resistance (which can be risky due to the possibility of a false breakout), this strategy waits for the price to "retest" the breakout area again to ensure it has become a strong support area, and then enters with greater safety.
2. Strategy steps as shown in the image:
* Resistance: Initially, the price had difficulty breaking through the gray line (the ceiling), forming a resistance area.
* Breakout: The long green candles strongly broke through the resistance area upwards. Here, this level changes from 'Resistance' to 'Demand' or support.
* Pullback or Re-test: After rising, the price returned to fall (the red candles) to touch the gray demand area again. This movement is called 'Re-test'.
* Confirmation Candle (The Signal Candle):
* Notice the candle surrounded by a light blue circle.
* This candle has a long tail down (Pin Bar or Hammer).
* The long tail means that sellers tried to push the price down, but buyers (demand) were strong and pushed the price back up before the candle closed. This is a strong entry signal.
3. Trade Plan (Execution):
* Entry Point: A buy order is placed just above the high of the confirmation candle (the candle with the tail) to ensure that the price has actually started to rise.
* Stop Loss Area: It is placed below the demand area (the gray rectangle) or below the tail of the entry candle. This protects you in case the pattern fails and the price collapses.
* Initial Target: It is at the previous high that the price reached before the correction (the upper dashed line).
Summary:
You wait for the breakout, then the return to the broken level, then look for a reversal candle (like a hammer) at this level to enter the trade, giving you a higher success rate and lower risk compared to random buying during a strong rise.
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