Breaker Blocks Flashcards
Explain what a breaker block is.
A breaker block is the move up or down prior to the break of structure to the upside/downside.
Explain what a bearish breaker block is.
Imagine an uptrend that reverses to the downside. Prior to the high (liquidity sweeper) that take us to a break of structure, there is a move down. The breaker block is from the top of this move down to the bottom. This is essentially just a failed retrace, there are not enough buy orders to push price to continue in uptrend, the new high sweeps liquidity and forms a new lower low indicating a BOS. Price retraces into the breaker block and because of the lack of buy orders, price surges back down.
Explain what a bullish breaker block is.
Imagine there is a downtrend that reverses to the upside. Prior to the low that sends us to the upside (the liquidity sweeper, there is a move up, this is the breaker block. This is essentially a failed retrace, there are not enough sell orders to get a full extension to the downside and keep price in the downtrend. So when price retraces down into the block and buy orders are filled, price surges to the upside as there is very little sell resistance.
