Example of a wrong trendline breakout using Demark.
First thing we should learn in a kind of Demark for dummies introdution are the three conditions to be met for a valid breakout.
1. Last candle must close above/below a trendline.
2. The 7Stoch (or any fast nrp oscillator) must show that there is already some bullish or bearish strength in the market (20/80 crosses or even 10/90 could be good) but not as the result of an over extended move. If we need bullish strenght confirmation for a breakout to the upside we must look for an Stoch going from the bottom towards the top.
3. Last fractal shown in the chart must be in the opposite side of the breakout. An easy trick to learn it is to divide the fractals in 'Buy' or 'Sell' ones using two different colors.
Imagen 005.jpg
If you are considering to take a breakout to the downside, for example, make sure that the last fractal shown in the chart is red. This validation by fractals is very important.
This is an example of a bad breakout situation. Of course, the breakout could work, but there are high odds for it to be a fakeout, just a little scratch on the trendline. The fact that the 7Stoch is already at the bottom and the last fractal is in green are not a coincidence. Price could be trying to reverse up and the last push down could be a bear trap.
Bad breakout.jpg
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