A breaker block continuation entry is a trading technique that looks for opportunities to enter a trend after a price retracement. It leverages the concept of "breaker blocks," which are essentially failed support or resistance levels that, when broken, signal a potential continuation of the existing trend. This strategy helps traders identify relatively low-risk entry points within an established trend.

Overview

The core idea is that when a support level breaks during a downtrend (or a resistance level breaks during an uptrend), it often becomes a new resistance level (or support level). The breaker block continuation entry seeks to capitalize on the price revisiting this broken level before continuing in the direction of the prevailing trend. It’s a method of finding entries that align with the overall market momentum.

When It Helps

This strategy is particularly useful in trending markets where pullbacks or retracements are common. It helps filter out false breakouts and provides a more structured approach to entering a trend than simply chasing momentum. It's most effective when the overall market sentiment supports the existing trend. Avoid using it in choppy or ranging markets, as the price may not respect the broken level.

How To Try

Here's a simplified approach to try this on platforms like TradingView:

1. Identify a Trend: Determine the prevailing trend (uptrend or downtrend) using price action or indicators like moving averages.

2. Locate a Breaker Block: Find a recent support level broken in a downtrend, or a resistance level broken in an uptrend. This is your potential breaker block.

3. Wait for a Retracement: Observe if the price retraces back to the broken level (the breaker block).

4. Look for Confirmation: Before entering, look for confirmation signals like candlestick patterns (e.g., bearish engulfing at resistance in a downtrend) or a bounce off the level.

5. Set Stop-Loss and Target: Place your stop-loss order just above the breaker block (for short entries) or below (for long entries). Set a profit target based on a reasonable risk-reward ratio, considering previous swing lows/highs.

Key Settings

There are no specific indicator settings for this strategy, as it primarily relies on price action analysis. However, consider using:

• Moving Averages: To help identify the overall trend direction.

• Fibonacci Retracements: To identify potential retracement levels in addition to the breaker block.

Tips & Risks

• Patience is Key: Wait for the price to actually retest the breaker block and show signs of reversal before entering.

• Risk Management: Always use a stop-loss order to protect your capital. The breaker block can fail.

• Psychology: Avoid FOMO (fear of missing out). Not every setup will be perfect; stick to your plan and risk management rules.

• Market Context: Consider the broader market context. Is there news or economic data that could impact the trend?

• Backtesting: Before using this strategy with real money, backtest it on historical data to see how it performs.

Quick Checklist

• Identify the prevailing trend.

• Locate a recent breaker block.

• Wait for a price retracement to the breaker block.

• Look for confirmation signals before entering.

• Set a stop-loss order and profit target.