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    ne the difference between the price of closing and the price minimal on the eve of the supply line breakout upwards (A-B). Further, the price of closing in the same very day must be added to this difference. As one can see, the resulting value is smaller than the price at the breakout point. This confirms that the breakout is true.

    Chart 2.12 Soybeans Oil. (For view the picture see notes in end of article)

    The principal drawbacks of the “classical” theory of distinguishing the true and false breakouts of technical levels at Forex from the viewpoint of Masterforex-V TS.

    Such drawbacks are the following.

    1. The “classical” theory of the true and false breakouts of technical levels was developed not issuing from conditions of Forex money-market (where the trading volume was not taken into account). Some other markets were considered.

    2. Even T. DeMarque has recognized that this approach is incorrect in total. This classicist has admitted the following. As far as he is concerned, he still doesn’t know any technique that could permit traders to see whether the price breakout is true or false.

    One can judge by oneself.

    Really, it is evident that the deal opening directly after the previous day technical level breakout must be specified much more exactly. E. Neiman doesn’t write about this aspect directly. However, his approach to the order opening is based on the conviction that a given breakout must happen along the trend development direction. This approach must be scrutinized much more closely. The reason is that the one of the keystone figures of reversal (such as either “the head and shoulders”, or “the head and shoulders reversed”) is purely the result of (exactly indicates) a local peak breako

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    See beginning of this article under name "Forex Secrets - The True And False Breakouts Of The Resistance And Support Levels on Forex. (Part I)”

    In “Stock exchange secrets”, L. Connors and L. Rushky state the following. In trading on the deviations (oscillations), the most appropriate model is the trading on the trial of the previous peaks (maximums or minimums). Such tests enable us to indicate the double breakpoint (rest-point, salient point). Thus, one can find a perfect position for opening a deal. Under such conditions, the risk of losses is minimal. The detection (test, probe) of a minimum, where the long-term position must be opened, can take place slightly higher or lower. All the same, the support cannot be established before the realization of the detection (test, probe). The majority of our models has become formed exactly after the successful detection (test, probe) – i.e., after the previous maximum/minimum approbation by the market and returning to this value again.

    Chart 2.9. An example of the double breakpoint (rest-point, salient point). (For view the picture see notes in end of article)

    T. DeMarque has examined the difference between the true and false breakouts through the technical levels. He has emphasized the importance of estimating whether the intra-day price breakouts are true. TD-points must be chosen correctly. TD-line must be plotted from the right to the left. The price guideposts must be calculated. After this, the three way-outs must be considered:

    1. There can appear the signs of the tendency reversal.

    2. A substantial shift in the correlation between the demand and proposal is possible.

    3. The price guidepost realization is important as well.

    Besides, there is another factor, to which the attention should be paid. One must consider whether the intra-day price breakout is true. This is especially important. I regard my investigations in this area as a substantial contribution into improving of the technique of choice of a moment of entering the market - and leaving it. What is more, the given principles are applicable in other methods of the technical analysis as well. The following situation is rather typical. Traders take a position at points of the trend line breakout to-be. Than they with horror watch that prices stop and start to move in the opposite direction. This results in substantial losses. However, those very traders keep on doing the same mistake, not thinking about the origins of it. False breakouts are always rather frequent. It is trader’s stumbling block, because of which some of traders totally refuse to use the trend line. A techniques of developing TD-lines has somewhat improved this situation. Nevertheless, false breakouts do happen. As far as I know, a technique of estimating whether the breakout is false or true is not developed yet.

    We now dwell on the breakout qualifiers.

    TD-qualifier of the breakout #1.

    The signal of “buy” is true if the price of closing has decreased the day before the signal arrival.

    The signal of “sell” is true if the price of closing has increased the day before the signal arrival

    TD-qualifier of the breakout #2.

    The signal of “buy” is true if the price of opening is higher than the price of breakout.

    The signal of “sell” is true if the price of opening is lower than the price of breakout.

    TD-qualifier of the breakout #3.

    The signal of “buy” is true if the price of closing on the eve of the breakout, summed up with the difference between the price of closing and the minimum price in the same day (or the price of closing the two days before the breakout if it is lower) is lower than the price of breakout.

    The signal of “sell” is true if the difference between the price of closing on the eve of breakout and the difference between the maximal prices of closing in the same day (or the price of closing the two days before the breakout if it is higher) exceeds the price of breakout.

    I have discovered three TD Breakout Qualifiers. There are two price models, formed the day before the probable breakout. In addition, there is one model, which is formed in the day of breakout. In particular, I have drawn the following conclusion. If a market is in the state of oversell (overbuy) the day before the breakout, there increases the possibility that the amount (pressure) of buyers (sellers) all the same will not become diminished after the breakout. This makes just illusion of the market strength (weakness).

    Giving analysis to the price behavior on the eve of breakout, I have discovered the following. If the price of closing on the eve of breakout upwards is lower than in the previous day, the probability of the true intra-day breakout increases.

    In this case, it can be recommended to open a position in the intra-day intersection (crossing) of the trend line. I determine this as TD Breakout Qualifier #1 (see Chart 1.37 ??).

    In a way, TD Breakout Qualifier #3 is similar to TD Breakout Qualifier #1. Really, it also takes into account the price movement on the eve of the trend line breakout. However, in the case of TD Breakout Qualifier #3 one determines the difference between the maximum price and the price of closing on the eve of the trend line breakout downwards. Further this difference is subtracted from that very price of closing. It is the method of calculating the supply value. The demand value is calculated in the following way. The difference between the price of closing and the minimum price on the eve of the trend line breakout upwards is added tothat very price of closing (see Charts 2.10, 2.11 (143 and 144)).

    Chart 2.10 S T Bonds. (For view the picture see notes in end of article)

    The true breakout can be detected in the following way. One must find the difference between the price of closing on the eve the breakout upwards and the minimum price in that very day (or the price of closing in the previous day – if it is lower). Further it is necessary to add this difference to the price of closing in the day before the breakout. If the value obtained is lower than the price at the point of breakout, the breakout is considered true. If the value obtained is larger than the price at the point of breakout - most probably, the breakout is false

    In the given example (see Chart ??), the difference between the price of closing and the minimum price on the eve of the breakout of TD-line of supply (A-B) is added to the price of closing in that very day. The value obtained is smaller than the price at the point of breakout. Consequently, the trend line breakout is true. In this chart TD-line of demand (A’-B’) is also drawn (plotted).

    In Chart (145??), for determining whether the trend line breakout downwards is true, the use is made of the procedure, the sense of which is reversed with respect to the above-described one.

    Chart 2.11 S&P 500. (For view the picture see notes in end of article)

    First, one has to determine the difference between the price of closing and the price minimal on the eve of the supply line breakout upwards (A-B). Further, the price of closing in the same very day must be added to this difference. As one can see, the resulting value is smaller than the price at the breakout point. This confirms that the breakout is true.

    Chart 2.12 Soybeans Oil. (For view the picture see notes in end of article)

    The principal drawbacks of the “classical” theory of distinguishing the true and false breakouts of technical levels at Forex from the viewpoint of Masterforex-V TS.

    Such drawbacks are the following.

    1. The “classical” theory of the true and false breakouts of technical levels was developed not issuing from conditions of Forex money-market (where the trading volume was not taken into account). Some other markets were considered.

    2. Even T. DeMarque has recognized that this approach is incorrect in total. This classicist has admitted the following. As far as he is concerned, he still doesn’t know any technique that could permit traders to see whether the price breakout is true or false.

    One can judge by oneself.

    Really, it is evident that the deal opening directly after the previous day technical level breakout must be specified much more exactly. E. Neiman doesn’t write about this aspect directly. However, his approach to the order opening is based on the conviction that a given breakout must happen along the trend development direction. This approach must be scrutinized much more closely. The reason is that the one of the keystone figures of reversal (such as either “the head and shoulders”, or “the head and shoulders reversed”) is purely the result of (exactly indicates) a local peak breakou

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    nother factor, to which the attention should be paid. One must consider whether the intra-day price breakout is true. This is especially important. I regard my investigations in this area as a substantial contribution into improving of the technique of choice of a moment of entering the market - and leaving it. What is more, the given principles are applicable in other methods of the technical analysis as well. The following situation is rather typical. Traders take a position at points of the trend line breakout to-be. Than they with horror watch that prices stop and start to move in the opposite direction. This results in substantial losses. However, those very traders keep on doing the same mistake, not thinking about the origins of it. False breakouts are always rather frequent. It is trader’s stumbling block, because of which some of traders totally refuse to use the trend line. A techniques of developing TD-lines has somewhat improved this situation. Nevertheless, false breakouts do happen. As far as I know, a technique of estimating whether the breakout is false or true is not developed yet.

    We now dwell on the breakout qualifiers.

    TD-qualifier of the breakout #1.

    The signal of “buy” is true if the price of closing has decreased the day before the signal arrival.

    The signal of “sell” is true if the price of closing has increased the day before the signal arrival

    TD-qualifier of the breakout #2.

    The signal of “buy” is true if the price of opening is higher than the price of breakout.

    The signal of “sell” is true if the price of opening is lower than the price of breakout.

    TD-qualifier of the breakout #3.

    The signal of “buy” is true if the price of closing on the eve of the breakout, summed up with the difference between the price of closing and the minimum price in the same day (or the price of closing the two days before the breakout if it is lower) is lower than the price of breakout.

    The signal of “sell” is true if the difference between the price of closing on the eve of breakout and the difference between the maximal prices of closing in the same day (or the price of closing the two days before the breakout if it is higher) exceeds the price of breakout.

    I have discovered three TD Breakout Qualifiers. There are two price models, formed the day before the probable breakout. In addition, there is one model, which is formed in the day of breakout. In particular, I have drawn the following conclusion. If a market is in the state of oversell (overbuy) the day before the breakout, there increases the possibility that the amount (pressure) of buyers (sellers) all the same will not become diminished after the breakout. This makes just illusion of the market strength (weakness).

    Giving analysis to the price behavior on the eve of breakout, I have discovered the following. If the price of closing on the eve of breakout upwards is lower than in the previous day, the probability of the true intra-day breakout increases.

    In this case, it can be recommended to open a position in the intra-day intersection (crossing) of the trend line. I determine this as TD Breakout Qualifier #1 (see Chart 1.37 ??).

    In a way, TD Breakout Qualifier #3 is similar to TD Breakout Qualifier #1. Really, it also takes into account the price movement on the eve of the trend line breakout. However, in the case of TD Breakout Qualifier #3 one determines the difference between the maximum price and the price of closing on the eve of the trend line breakout downwards. Further this difference is subtracted from that very price of closing. It is the method of calculating the supply value. The demand value is calculated in the following way. The difference between the price of closing and the minimum price on the eve of the trend line breakout upwards is added tothat very price of closing (see Charts 2.10, 2.11 (143 and 144)).

    Chart 2.10 S T Bonds. (For view the picture see notes in end of article)

    The true breakout can be detected in the following way. One must find the difference between the price of closing on the eve the breakout upwards and the minimum price in that very day (or the price of closing in the previous day – if it is lower). Further it is necessary to add this difference to the price of closing in the day before the breakout. If the value obtained is lower than the price at the point of breakout, the breakout is considered true. If the value obtained is larger than the price at the point of breakout - most probably, the breakout is false

    In the given example (see Chart ??), the difference between the price of closing and the minimum price on the eve of the breakout of TD-line of supply (A-B) is added to the price of closing in that very day. The value obtained is smaller than the price at the point of breakout. Consequently, the trend line breakout is true. In this chart TD-line of demand (A’-B’) is also drawn (plotted).

    In Chart (145??), for determining whether the trend line breakout downwards is true, the use is made of the procedure, the sense of which is reversed with respect to the above-described one.

    Chart 2.11 S&P 500. (For view the picture see notes in end of article)

    First, one has to determine the difference between the price of closing and the price minimal on the eve of the supply line breakout upwards (A-B). Further, the price of closing in the same very day must be added to this difference. As one can see, the resulting value is smaller than the price at the breakout point. This confirms that the breakout is true.

    Chart 2.12 Soybeans Oil. (For view the picture see notes in end of article)

    The principal drawbacks of the “classical” theory of distinguishing the true and false breakouts of technical levels at Forex from the viewpoint of Masterforex-V TS.

    Such drawbacks are the following.

    1. The “classical” theory of the true and false breakouts of technical levels was developed not issuing from conditions of Forex money-market (where the trading volume was not taken into account). Some other markets were considered.

    2. Even T. DeMarque has recognized that this approach is incorrect in total. This classicist has admitted the following. As far as he is concerned, he still doesn’t know any technique that could permit traders to see whether the price breakout is true or false.

    One can judge by oneself.

    Really, it is evident that the deal opening directly after the previous day technical level breakout must be specified much more exactly. E. Neiman doesn’t write about this aspect directly. However, his approach to the order opening is based on the conviction that a given breakout must happen along the trend development direction. This approach must be scrutinized much more closely. The reason is that the one of the keystone figures of reversal (such as either “the head and shoulders”, or “the head and shoulders reversed”) is purely the result of (exactly indicates) a local peak breako

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    ut, summed up with the difference between the price of closing and the minimum price in the same day (or the price of closing the two days before the breakout if it is lower) is lower than the price of breakout.

    The signal of “sell” is true if the difference between the price of closing on the eve of breakout and the difference between the maximal prices of closing in the same day (or the price of closing the two days before the breakout if it is higher) exceeds the price of breakout.

    I have discovered three TD Breakout Qualifiers. There are two price models, formed the day before the probable breakout. In addition, there is one model, which is formed in the day of breakout. In particular, I have drawn the following conclusion. If a market is in the state of oversell (overbuy) the day before the breakout, there increases the possibility that the amount (pressure) of buyers (sellers) all the same will not become diminished after the breakout. This makes just illusion of the market strength (weakness).

    Giving analysis to the price behavior on the eve of breakout, I have discovered the following. If the price of closing on the eve of breakout upwards is lower than in the previous day, the probability of the true intra-day breakout increases.

    In this case, it can be recommended to open a position in the intra-day intersection (crossing) of the trend line. I determine this as TD Breakout Qualifier #1 (see Chart 1.37 ??).

    In a way, TD Breakout Qualifier #3 is similar to TD Breakout Qualifier #1. Really, it also takes into account the price movement on the eve of the trend line breakout. However, in the case of TD Breakout Qualifier #3 one determines the difference between the maximum price and the price of closing on the eve of the trend line breakout downwards. Further this difference is subtracted from that very price of closing. It is the method of calculating the supply value. The demand value is calculated in the following way. The difference between the price of closing and the minimum price on the eve of the trend line breakout upwards is added tothat very price of closing (see Charts 2.10, 2.11 (143 and 144)).

    Chart 2.10 S T Bonds. (For view the picture see notes in end of article)

    The true breakout can be detected in the following way. One must find the difference between the price of closing on the eve the breakout upwards and the minimum price in that very day (or the price of closing in the previous day – if it is lower). Further it is necessary to add this difference to the price of closing in the day before the breakout. If the value obtained is lower than the price at the point of breakout, the breakout is considered true. If the value obtained is larger than the price at the point of breakout - most probably, the breakout is false

    In the given example (see Chart ??), the difference between the price of closing and the minimum price on the eve of the breakout of TD-line of supply (A-B) is added to the price of closing in that very day. The value obtained is smaller than the price at the point of breakout. Consequently, the trend line breakout is true. In this chart TD-line of demand (A’-B’) is also drawn (plotted).

    In Chart (145??), for determining whether the trend line breakout downwards is true, the use is made of the procedure, the sense of which is reversed with respect to the above-described one.

    Chart 2.11 S&P 500. (For view the picture see notes in end of article)

    First, one has to determine the difference between the price of closing and the price minimal on the eve of the supply line breakout upwards (A-B). Further, the price of closing in the same very day must be added to this difference. As one can see, the resulting value is smaller than the price at the breakout point. This confirms that the breakout is true.

    Chart 2.12 Soybeans Oil. (For view the picture see notes in end of article)

    The principal drawbacks of the “classical” theory of distinguishing the true and false breakouts of technical levels at Forex from the viewpoint of Masterforex-V TS.

    Such drawbacks are the following.

    1. The “classical” theory of the true and false breakouts of technical levels was developed not issuing from conditions of Forex money-market (where the trading volume was not taken into account). Some other markets were considered.

    2. Even T. DeMarque has recognized that this approach is incorrect in total. This classicist has admitted the following. As far as he is concerned, he still doesn’t know any technique that could permit traders to see whether the price breakout is true or false.

    One can judge by oneself.

    Really, it is evident that the deal opening directly after the previous day technical level breakout must be specified much more exactly. E. Neiman doesn’t write about this aspect directly. However, his approach to the order opening is based on the conviction that a given breakout must happen along the trend development direction. This approach must be scrutinized much more closely. The reason is that the one of the keystone figures of reversal (such as either “the head and shoulders”, or “the head and shoulders reversed”) is purely the result of (exactly indicates) a local peak breako

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    on the eve of the trend line breakout downwards. Further this difference is subtracted from that very price of closing. It is the method of calculating the supply value. The demand value is calculated in the following way. The difference between the price of closing and the minimum price on the eve of the trend line breakout upwards is added tothat very price of closing (see Charts 2.10, 2.11 (143 and 144)).

    Chart 2.10 S T Bonds. (For view the picture see notes in end of article)

    The true breakout can be detected in the following way. One must find the difference between the price of closing on the eve the breakout upwards and the minimum price in that very day (or the price of closing in the previous day – if it is lower). Further it is necessary to add this difference to the price of closing in the day before the breakout. If the value obtained is lower than the price at the point of breakout, the breakout is considered true. If the value obtained is larger than the price at the point of breakout - most probably, the breakout is false

    In the given example (see Chart ??), the difference between the price of closing and the minimum price on the eve of the breakout of TD-line of supply (A-B) is added to the price of closing in that very day. The value obtained is smaller than the price at the point of breakout. Consequently, the trend line breakout is true. In this chart TD-line of demand (A’-B’) is also drawn (plotted).

    In Chart (145??), for determining whether the trend line breakout downwards is true, the use is made of the procedure, the sense of which is reversed with respect to the above-described one.

    Chart 2.11 S&P 500. (For view the picture see notes in end of article)

    First, one has to determine the difference between the price of closing and the price minimal on the eve of the supply line breakout upwards (A-B). Further, the price of closing in the same very day must be added to this difference. As one can see, the resulting value is smaller than the price at the breakout point. This confirms that the breakout is true.

    Chart 2.12 Soybeans Oil. (For view the picture see notes in end of article)

    The principal drawbacks of the “classical” theory of distinguishing the true and false breakouts of technical levels at Forex from the viewpoint of Masterforex-V TS.

    Such drawbacks are the following.

    1. The “classical” theory of the true and false breakouts of technical levels was developed not issuing from conditions of Forex money-market (where the trading volume was not taken into account). Some other markets were considered.

    2. Even T. DeMarque has recognized that this approach is incorrect in total. This classicist has admitted the following. As far as he is concerned, he still doesn’t know any technique that could permit traders to see whether the price breakout is true or false.

    One can judge by oneself.

    Really, it is evident that the deal opening directly after the previous day technical level breakout must be specified much more exactly. E. Neiman doesn’t write about this aspect directly. However, his approach to the order opening is based on the conviction that a given breakout must happen along the trend development direction. This approach must be scrutinized much more closely. The reason is that the one of the keystone figures of reversal (such as either “the head and shoulders”, or “the head and shoulders reversed”) is purely the result of (exactly indicates) a local peak breako

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    ne the difference between the price of closing and the price minimal on the eve of the supply line breakout upwards (A-B). Further, the price of closing in the same very day must be added to this difference. As one can see, the resulting value is smaller than the price at the breakout point. This confirms that the breakout is true.

    Chart 2.12 Soybeans Oil. (For view the picture see notes in end of article)

    The principal drawbacks of the “classical” theory of distinguishing the true and false breakouts of technical levels at Forex from the viewpoint of Masterforex-V TS.

    Such drawbacks are the following.

    1. The “classical” theory of the true and false breakouts of technical levels was developed not issuing from conditions of Forex money-market (where the trading volume was not taken into account). Some other markets were considered.

    2. Even T. DeMarque has recognized that this approach is incorrect in total. This classicist has admitted the following. As far as he is concerned, he still doesn’t know any technique that could permit traders to see whether the price breakout is true or false.

    One can judge by oneself.

    Really, it is evident that the deal opening directly after the previous day technical level breakout must be specified much more exactly. E. Neiman doesn’t write about this aspect directly. However, his approach to the order opening is based on the conviction that a given breakout must happen along the trend development direction. This approach must be scrutinized much more closely. The reason is that the one of the keystone figures of reversal (such as either “the head and shoulders”, or “the head and shoulders reversed”) is purely the result of (exactly indicates) a local peak breakout of the previous day.

    Some traders try “to play safe”. Avoiding not getting into the “head and shoulders” figure, they open deals after 5 (!) days to start from the technical level breakout. In this connection, there arise the following questions.

    Surely, one could give analysis to broad markets post factum. In this case, one can choose heavy trends of the duration within 30-70 days or longer (as Swagger did it). Thus, one can recommend traders to open their deals in the 6th day to start from the technical level breakout.

    However, what’s about the real trading? Under such conditions, a trader does not know the trend actual duration. For instance, see Chart 2.12 GBP/USD pair movement on June 30, 2006 can serve as an example. The support at 1.8000 has been broken through. After waiting for 5 days, one could open a deal in the vicinity to 1.7560 at the 6th day – i.e., after the currency has already advanced more than the half-way in its movement (by 440 points!). Now one could expect a local minimum at 1.7310 - to be more precise, at 1.7435. Exactly at this point, after the breakout thorough the previous day maximum, the currency has reversed.

    Chart 2. 12 GBP/USD pair movement (For view the picture see notes in end of article)

    Thus, making use of the technique by Swagger one can gain just 125 points under the conditions of a strong trend (690 points). However, one must keep in mind that the reversal could happen earlier. That is, one losed 500 point in order to dogmatically stick to the rule “not to open a deal during the first 5 days after the level breakout”. As the result, a deal will be opened at the end of the currency movement or before the recoil. When a dogma does not correspond to the practice any more, it would be better to decline (reject) it, would not it?

    We now dwell on the recoil system according to T. Chand in his book “On the other side of the technical analysis). Notwithstanding all the positive aspects of this system, a very serious drawback is inherent in it. That is, within the framework of this system one cannot detect a point at which the recoil turns into the reversal.

    The theory of the level breakout, developed by D. Cats and D. McCormick in “Encyclopedia of trading strategies”, must be revised (specified) from the viewpoint of (with respect to) the price of closing in the previous day. That is, one can give hundreds of examples when the work according to the given technique is profitable at Forex. At the same time, there are also hundreds of disadvantageous situations – e.g., the breakout through a local peak in the previous day can result either in the reversal or in a very heavy recoil towards the direction, opposite to the level breakout.

    In the framework of the classical analysis given to Forex, the notions of technical levels of resistance/support of tilted (slant) and horizontal channels are not clearly defined – they are just “piled up”. Hence, how can one tell the difference between these characteristics from those the features in common?

    Elder was the first who attracted attention to the following problem. How to elaborate one’s position in all the mess of true and false breakouts, trends and flats in different time frames?

    The currency pair movement may be divided as following.

    a) trend waves;

    b) trend recoils;

    c) a flat.

    After this, all possible combinations of these three characteristics must be put on trial in various time-frames at least at 3 screens - as A. Elder has recommended.

    It is necessary to calculate the number of combinations. For instance, there is the combination #1. That is, the trend is in the minimal timeframe, whereas the flat is in the large-scale timeframe.

    At what points it must be determined whereas level breakouts are false or true?

    Is it enough to use three screens (displays) according to Elder? Maybe more screens would be preferable.

    As far as I’m concerned, I work with 4 screens. What are the drawbacks and advantages of the given technique?

    How different timeframes are correlated with one another under the following condition. That is, at one’s point-of-sale terminal, there are 4 screens. However, one must take into account the quantity of timeframes much larger.

    What is the correlation between the technical levels of resistance and those of support, all of them being exposed at 4 screens?

    In what way do the fundamental and technical analyses supplement each other? How can a trader make use of the fundamental analysis from the viewpoint of its applying in the branch of the technical analysis, the problems of which are enumerated above?

    Note: Full text of this article and pictures of examples you can see on
    http://www.masterforex-v.su/002_002.htm

    If you wish to be trained on Trading System Masterforex-V - one of new and most effective techniques of trade on Forex in the world visit http://www.masterforex-v.su/

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