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Support and Resistance Basics for E-Mini Trading, Part 4 Breakouts and Breakdowns

I have to stress that determining where and what composes support and resistance is of utmost importance. Further, understanding support and resistance (SAR) allows a trader to make trades where other traders are likely to buy or to sell. My primary tool in e-mini trading is support and resistance, which is enhanced by an understanding of several different views of volume using order flow. For the most part we will talk about what happens when market price reaches support or resistance and bounces off those lines. That being said, it doesn't always bounce off SAR and sometimes breaks out or breaks down and can go for a pretty good distance, right? Your answer should have been it will probably move to the next stopping or starting line (SAR).
In my experience, the majority of price moves result in a bounce off known strong support or resistance; but, there is another possibility and that possibility is that price can continue through our lines and breakout or breakdown. There is one instance in which I never trade breakouts or breakdowns because of the low probability of success; I generally pass on trading breakouts of breakdowns into new high and new lows. Generally speaking, my experience with new high/low breakouts is their general propensity to result in a failed trade as the market gives the trader a good head fake and then bounces and turns the other way; ouch! That being said, here are some ideas for consideration when price appears in a position to pierce support and resistance:
· What has to happen in order for the resistance/support to fail? (volume, are traders on the bid or the ask side of the order flow?)
· What has to happen to see the price rejected at resistance/support? (volume, order flow)
· What is the context of the market? (is it a bracketed market or is it trending?)
· Is there room for the breakout/breakdown to move for a reasonable profit or is there further support or resistance that will hinder a significant move?
In this article we looked at breakouts and breakdowns and some of the conditions that need to be present to successfully trade each move. I stated that I am usually less than enthused to trade breakouts/breakdowns into new highs or new lows. Finally, we added some specific questions you might want to consider when taking a trade in the world of SAR.

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