One of the most important lessons that anyone, who wants to trade using Price Action, needs to learn is the retracement philosophy. Whenever price breaks any support or resistance, 80% of the time , price will retracement back to the support or resistance and it will then continue with the break. For eg, if the price breaks a support, price will retrace back to the support 80% of the time. When the retracement happens, that is your crucial period. If the price retraces back to the support plus or minus a few pips and then continues downwards, thats confirmation of the support break. This is the place where you either take a short or add to the short that you had already taken.
If the retracement pushes back above the support and continues upwards, then that shows that the support break was false.
Sunday, April 19, 2009
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