In my prior article on trading the false break strategy part 1, I shared the basic definition of a false break, covered what is the price action and order flow behind false breaks, and how we can trade them.
In this article, I will discuss how you can trade them using pin bars and engulfing bars , along with entry, SL and TP techniques. Below is another example of a false break: Looking at the chart above, we can see a clear downtrend, starting with A in the top left of the chart. The sell-off finds support at B, which eventually becomes a role reversal level at C. Further along at E, we can see the textbook false break setup , just like we defined in the prior article. The pair breaks up above the key level CT counter-trend , stalls, then sells off again breaking back below, and offering a great false break setup.
This sell off heads all the way down to F for a nicely profitable trade, and is a great example of a false break setup. Now we will discuss how to trade the false break setup with a pin bar. This is true if the body of the pin bar itself is housed within the prior bar. What we are going to discuss is how we can use this to trade the false break strategy in combination with the pin bar. In this chart above, we can see at A top left , there is a bullish move to the dynamic resistance 20 EMA.
From an order flow perspective , the sellers are stronger, since it took them less time to cover the same distance. Now notice at C how the pair briefly broke above A.
If the buyers were really in control, they would have kept pushing prices. But the pin bar formed a false break above the highs of the blue bar or prior bar. This breaking above then back below, suggested a likely false break and more selling. This is a great example of trading with the trend. Assuming I have read the price action context correctly, I generally like to enter using one of two methods: The first entry method more aggressive , can protect you from missing the move, as sometimes the false break never offers a second chance to enter.
One can use that as the only target, or as a first TP holding for a deeper move. Turning to the chart above, we can see the strong selling stops at A. This forms a price action squeeze , which leads to a breakout and further selling.
The pair pulls back to B the support level at A , and forms a false break. This is immediately followed by an engulfing bar. Now ask yourself, if the bulls were truly in control, why did the price action immediately reverse after taking out A? This should have been a clue to watch for a false break. This is a failed attempt to rally, suggesting the buyers tried to push higher, but failed. What results is heavy selling from the open of the next bar down to C, and eventually E, resulting in a nice profit.
Take a look at the move from C — D. This is a corrective pullback following an impulsive move. The corrective pullback went into the dynamic resistance 2o EMA , and then sold off heavily after. This would have represented a great pullback setup, and is a good example of how impulsive and corrective moves manifest.
For more information on why the pullback is a more optimal entry for the engulfing bar, click here. I then went into two more examples of the false break strategy, showing how you can trade them with pin bars and engulfing bars. I shared entry, SL and TP techniques, along with explaining the price action and order flow behind these great setups. These are just a few of the false break techniques available. I help traders of all levels change the way they think, trade and perform.
As a professional trader, I specialize in trading price action. As a teacher, my passion lies in showing you how to re-wire your brain for successful trading. Want to improve your edge right now? Visit my Price Action Course page. Complete and absolutely clear.
With a reasonable time spent testing it; will get anyone into greener days quickly. One of my favourites two-part articles from you. Am glad you liked it and found it clear. Yes, this is definitely a strategy you can profit from consistently once you learn it well. For the engulfing bar, do we take a pullback if it closes below or above the role reversal level?
Regarding the 2nd trade Engulfing bar, you mentioned trade with trend, so Is that top-left Impulsive Counter move followed by Pbar on the top? The information contained in or provided from or through this site is not intended to be and does not constitute financial advice, investment advice, trading advice or any other advice. The information on this site and provided from or through this site is general in nature and is not specific to you the user or anyone else.
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As a bonus for signing up, you will also get exclusive access to our monthly newsletter, which contains insights not published on the website. False Breaks Offer Great With Trend Trade Setups Trading the False Break with Pin Bars Trading the False Break with Engulfing Bars In my prior article on trading the false break strategy part 1, I shared the basic definition of a false break, covered what is the price action and order flow behind false breaks, and how we can trade them.
Chris Capre Buddhist, Trader and Philanthropist. You Might Also Enjoy. Hola Pablo, Am glad you liked it and found it clear. Kind Regards, Chris Capre. Hi Chris, Just a clarification. Once again another great article. Hola Amigo, Thanks mate — glad to hear you liked the article. Hi Chris Capre Thanks for your great articles as usual. Hello Arman, Glad you liked them. De nada PA Learner. Glad you are finding it informative. Dre and Jimmy Iovine 20 Engagements.
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