How to Trade a Simple Consolidation Breakout

How to Trade a Simple Consolidation Breakout

How to Trade a Simple Consolidation Breakout 300 169 Minimalist Trading – Best Trading Indicators for TradingView

If you’re looking to maximize your profits in a short time, then you need to focus on consolidations and wait for the consolidation breakout.

Why?

Because when a valid consolidation breakout occurs, the probability of trend continuation is very high.

This means that you can earn a significant profit in a relatively short time.

To this purpose, the Breakout Pivotal Bars (our consolidation indicator for TradingView) in combination with another great indicator that’s used in many profitable trading strategies, the Sentiment Index, plays a big role.

In fact, in the trade discussed below, we identify a simple consolidation breakout opportunity to the upside.

We then wait for the actual breakout to occur, and we simply execute the easy consolidation trading strategy explained below.

Trade setup – 12 Apr 2018

How to trade a simple consolidation breakout Setup 1

The price action and the compression in the bullish Sentiment Index are suggesting that we might get a buying opportunity soon.

We just need to wait for the consolidation breakout to occur.

Trade update – 12 Apr 2018

How to trade a simple consolidation breakout Setup 2

Not only we have the perfect buying opportunity, but the price is now even above a major support indicated by the Levels and Zones.

This major support will help our trade by pushing the price higher and probably easily reach the target, which we set by projecting the previous impulse to the upside.

The stop loss, instead, is set below the last few candles that happen to be in the middle of the consolidation. This should be more than enough since the price is above the major support, which should prevent it from falling below.

Trade update – 16 Apr 2018

How to trade a simple consolidation breakout Setup 3

After a few days, we can say that the setup got a little bit compromised by the fact that the major support ended and a new slightly higher resistance appeared.

Unfortunately, the price was still too close to our entry-level and so we could not move the stop loss to breakeven but, by not getting emotional, we kept the trade open and closely tracked what the price was doing.

It turned out that it retested our entry-level twice, and then moved higher. Now it has even broken to the upside the resistance which has now turned into a support.

Trade closed – 17 Apr 2018

How to trade a simple consolidation breakout Setup 4

The new support helped the price reaching the target, and so the trade is now closed with a profit.

We closed the trade with a 2.5x return, which sits in the low-end of our traditional profits, but it’s very frequent to achieve with this consolidation breakout trading strategy.

But what about you.

Do you like trading breakouts?

And in such a case, did you learn how to avoid fakeouts?

Let us know but leaving your comment on the YouTube video above.