BOF Setup

Lets look at our 2nd trading setup i.e. BOF Setup.

The BOF setup is a Breakout of Support or Resistance which Fails.
The support or resistance will be higher timeframe S/R or the upper or lower boundaries of a sideways trading range.
In a weak trend environment it may also provide a counter-trend trading opportunity at a swing H/L (however this is a lower probability opportunity)
When our principles for future trend direction lead us to expect an area of support or resistance to possibly break, we watch price action closely on any breakout for further signs of weakness. Weakness on the breakout will alert us to a possible BOF opportunity.
A trade is only entered if the setup then provides acceptable R:R parameters and a wholesale entry trigger.

A common question is, “How many price bars will you accept beyond the breakout before you stop looking for a breakout failure ?”

There is no fixed number. Every occurrence should be treated on its own merits, & considered from the perspective of how it appears to the breakout traders.
Is the price action causing them fear and the potential to abandon their position?
If so, is it still a potential BOF setup regardless of how many price bars have printed.
An example is when the market makes two attempts to move price after the breakout.
A second failure to do anything is often a good indication the market will do the opposite.
If after a breakout We see two attempts to push higher fail, we should be trying to establish a BOF entry.
However, with all of that being said, it would be rare to see it hold beyond say 3-6 trading timeframe bars.
The quicker the better!

In next article will see BPB setup and remember to practice going through different scripts and use HTF, TTF and LTF to get better picture.

BOF Setup ​