Michael 1.

Parsons

which direction the market is leaning toward before the move jumps into
high gear. Without some sort of early entry method you can easily find
that the profit opportunity is all over before you even have a chance to
enter.
The way around this is through a few modified rules for Channel
Surfing that focuses on specific situations related to breakouts. A
breakout entry is designed to take advantage of a modified channel
signal. It takes a little more effort to construct, but is much easier and
effective to enter when the situation calls for it.
Breakout entries are not a new concept. In fact, many trading systems are
totally depended upon them. The theory is that once you exceed a certain
level then the market should continue in the direction of the break for
some time, allowing a person to make a profit. This method has proven
itself many times over. fol lows a very simple and basic law of physics;
It
once an object is set in motion it will continue in motion. Only in this case
we are talking about price.
To be a true breakout entry price has to breakout ofsomething. It isn't
enough to have prices rising or dropping in the normal course of a trend,
but rather price had in a sense run into a brick wall and then had to
develop enough force to break through. If something has enough force to
break through a brick wall it isn't li kely to be stopped anytime soon. So
the obvious first step to finding a breakout trade is to find the proverbial
brick wall.
Of course, there are no literal brick walls in the market, but support
and resistance levels behave similarly. Support and resistance levels are
simply price levels that the market reached but couldn't exceed. In
essence, they are horizontal fences that price is li kely to bounce off of
because it did so in the past. Find a place where price set a new high or
low and then fell away from it and you have one of these fences. The
more times that price bounces off support or resistance, the more solid
that support or resistance is. It's as if each bounce is another brick that
is added to the wall. So ideally you want to look for levels that price had
bounced off of several times in the past, because once price does break
through and holds it should continue for some while.

Trading range breakouts

An ideal example of this would be a trading range. A trading range locks
price within a high and low boundary. Sometimes they can run for

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