Line Chart Breakout Strategy

Posted by admin on January 31, 2010 under Articles | Read the First Comment

What a good breakout strategy play posted by Cind

Introduction

Most of us are very familiar with candlestick charts which show the day high/low and closing. However, these intra-day highs and lows can create excessive noises and swings that may distort our technical analysis and buy entry level. In order to filter out such noises, a simple way is to change your charts to a linechart format, showing only the closing level of the counter. As the saying goes “the amateur opens the market while the pros closes the market”, the closing price or the line chart is more representative of the real strength and weakness.

How to apply LineChart Breakout
Conventionally, we often use 52-weeks high price level to define the pivot point for a breakout. When a trader chases after the new 52-weeks high price level, he/she will be subjected to higher risk of false breakout, higher penalty of cut-loss and higher mental stress. To have a good head-start in identifying a potential breakout counter, we can plot a linechart to define a much lower pivot point for buy entry.

An example using Kepland:

full article for Cind’s Line Chart Breakout Strategy

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