Setup Near Support/Resistance
For a break-out to happen, the smart money would have already taken positions before that happening – a trader with a large amount of funds can’t simply enter in the break-out, unless he’s not risking that much money. Usually those traders will open positions beforehand, and will enter more when the break-out happens. So this gives us an opportunity to understand on whether a break-out will be successful or not, and to have a method of evaluating the strength or weakness of a support/resistance. For that, as always, we look for clues in the volume and the spread and close of the bars.
Analytical Trader analyzes all the last bars for these signals automatically, and displays them on the background row. So if the background is weak, there are recent supply signals, and the price is near an important resistance, most likely there is no strength in the market to break the resistance. That justifies shorting in this spot.
1. Background is weak (background here could be either with 100 or 200 period, which the alerts take into account internally)
2. Supply/Major Supply signal near the resistance
3. Use a sell-stop below the weak signal’s low
There shouldn’t be Major Demand or Demand signals at this price level, which would increase the risk of the resistance being broken. The setup is equally valid for long setups.
Stop-loss: Set the stop-loss at the red dot.
Take-profit: Set the take-profit at the green dot.
Move stop-loss: When price reaches the blue dot (the indicator will automatically alert you), the stop-loss should be moved to break-even to protect profits