Price Action traders crave for the breakout. Breakout is one of the most important components of price action trading. However, there is another equally important thing, which is breakout confirmation. Since the Forex market is very action-packed, it is often found that the price does not come up to the breakout level to confirm the breakout. It consolidates and produces a reversal candle to offer entry. The question is, does it always consolidate and offer an entry.
Let us find out.
The price headed towards the South and seems to have found its support. It has been heading towards the North now. The price is at the last swing high. Thus, the buyers are to wait for an upside breakout and breakout confirmation to take a long entry.
The price makes a breakout, but at the time of confirmation, it comes back in. Thus, the breakout is void. It goes towards the upside again. This time it gets rejected from the last swing high. Thus, the price does not make any breakout here.
This time it does. A huge bullish engulfing candle breaches the last swing high. That is a Double Top resistance as well. The buyers are to wait for the price to come back at the breakout level and get a bullish reversal candle right there. Alternatively, it may consolidate somewhere in between the highest high and the breakout level.
It keeps going up. Let us not give up but keep eyeing on the pair. It has gone too far up. It may not come back at the breakout level. It may rather consolidate. Let us find out what it does.
It keeps going towards the North. There is no sign of consolidation yet. A swing high on the chart is evident, which is nearby. As things stand, risk-reward is getting less lucrative.
As expected, the price has found its resistance before the level of the last swing high. The price action gets choppy. Traders are to wait for the price to give them the next direction. In a word, price action traders do not keep this kind of chart on their watch list.
The Bottom Line
A chart looked extremely good and was about to give us an entry ended up being a choppy chart. What more frustrating is it went towards the desired direction, but it did not offer us entry. Some traders may think it would be good if an entry is taken. At least some pips can be achieved. Please note, do not even think about it. After breakout, the price must confirm the breakout or consolidate. To sum up the whole equation, no confirmation or no consolidation means no entry.