top of page

How to Trade a Break Out or Break Down with Disequilibrium Moves

LDM and Forecast LDM as Resistance, SDM and Forecast SDM as Support.

bre.JPG

1. LDM and Forecast LDM as Resistance:
• When LDM and the Forecast LDM are aligned equally, they form a strong resistance level. This means that the price is likely to struggle to move above this level.

2. SDM and Forecast SDM as Support:
• Similarly, when SDM and the Forecast SDM are aligned equally, they create a strong support level. This indicates that the price is likely to find it difficult to drop below this level.

3. Side-by-Side Alignment and Breakout:
• If the LDM and Forecast LDM are aligned side by side, and the SDM and Forecast SDM are also aligned side by side, it suggests that the price is poised for a breakout. This breakout is likely to be an impulsive move, meaning it will be strong and significant.

4. Analyzing the Chart:
• Observe how the price interacts with these levels.
• Look for patterns or signals that indicate whether the price is likely to respect these levels as support or resistance, or if a breakout is imminent.

5. Trading Strategies
• Identify Potential Breakouts: When LDM and Forecast LDM are side by side, and SDM and Forecast SDM are also side by side, it indicates a potential breakout.

• Enter on Breakout: If the price breaks above the resistance level (LDM and Forecast LDM), consider entering a long position. If the price breaks below the support level (SDM and Forecast SDM), consider entering a short position.

6. Using Stop-Loss and Take-Profit
• Stop-Loss: Place your stop-loss orders just below the support level (for long positions) or just above the resistance level (for short positions) to minimize potential losses.
• Take-Profit: Set your take-profit levels based on the next significant support or resistance level or use a risk-reward ratio to determine your exit points.

Example Scenario
1. Setup: You identify the LDM at 150 and the SDM at 140. Your forecasted levels are 152 for LDM and 138 for SDM.
2. Range Trading: If the price drops to 138-140, you buy, expecting it to rise. If it rises to 150-152, you sell, expecting it to fall.
3. Breakout Trading: If the price breaks above 152 with strong volume, you enter a long position. If it breaks below 138, you enter a short position.

Stocks Acumen Logo

Risk Warning & Important notice : 

Trading in the stock market involves substantial risk and is not suitable for every investor. It's essential to understand the risks involved and seek professional advice if needed before engaging in stock market activities. Stocksacumen.com encourages responsible trading practices and urges individuals to be aware of the potential financial risks associated with stock market investments.

bottom of page