Understanding Our Trend-Following Strategy: Zones, Breakouts, and Continuations

This guide explains the trend-following framework at the core of our system.
It is designed for beginners who want a clear, structured way to understand how trends work, how price moves within larger ranges, and how to recognise opportunities without relying on predictions or guesswork.

The approach is rules-based and simple:
Identify the trend. Understand where price is inside that trend. Use clear, objective triggers for potential opportunities.

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1. Start With the Trend

Every decision begins with the trend.
A market can be:

• Bullish: consistently moving upward
• Bearish: consistently moving downward
• Not trending: unclear or choppy

If there is no trend, the strategy does nothing.
This avoids unnecessary trades and keeps the focus on markets already showing direction.

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2. Understand Where Price Is Inside the Move (Zones)

To understand price in context, we break the full price range (from recent low to recent high) into four simple zones:

• Upper zone: near the higher end of the range
• Mid-upper zone: above the midpoint and progressing
• Accumulation zone: central region of the range
• Deep zone: near the lower end of the range

These zones do not forecast turning points.
They help answer one question:

“Where is price sitting inside the move?”

This makes very different markets easier to compare because they are all measured on the same 0-to-1 scale.

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3. Two Strategy Types: Breakout and Continuation

When a trend is in place and we know the zone, the system checks for one of two opportunities.

Strategy 1: Breakout

A breakout happens when price moves from its current zone into the next zone in the direction of the trend.

It shows:

• Strength
• Momentum
• A clean transition through structure

The profit trigger for a breakout is the start of the profit-taking zone — the level at which the trend has advanced enough to reveal a realistic profit window.

The profit target is the midpoint of the next zone.

Strategy 2: Trend Continuation

This occurs when price pulls back toward the short-term trend line and holds, then resumes moving in the same direction.

It shows:

• Trend strength
• Healthy pullbacks
• Continuation rather than early momentum

The profit trigger and target follow the same rules as the breakout:
start of the profit zone → midpoint of the next zone.

Strategy Priority

1. Breakout
2. Continuation
3. No strategy if conditions are invalid

This ordering avoids conflicts and keeps the method disciplined.

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4. Profit Trigger, Profit Target, and Invalidation

Each opportunity is defined by three levels:

Profit Trigger

The start of the profit-taking zone.
This is where the trend has developed enough to reveal a clear, structured move.

Profit Target

The midpoint of the next zone — a reasonable extension of the trend, not an extreme.

Invalidation

The level that breaks the idea.
If price crosses this, the trend structure behind the opportunity is no longer intact.

These three levels give the framework clarity:

• where the opportunity begins
• where it reasonably aims
• where it stops being valid

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5. Understanding Status: The Cost of Participation

A strong setup is not enough on its own.
You also need to know whether the cost of participating is favourable.

To measure this, the strategy compares:

• the expected upside
• the cost of common at-the-money call options

This produces three possible labels:

Waiting

Options are inexpensive because the market has not fully priced in the trend yet.
The trend is present, but the options market is hesitant or slow to react.

This is why the label is “Waiting” — not waiting for the trend, but waiting for alignment between price movement and option pricing.

Active Early

Trend and pricing are aligning.
Options are reasonably priced, and the move has room.

Active Late

Options are expensive relative to the remaining upside.
The trend may continue, but the cost is less favourable.

The status is informational.
It helps you weigh the opportunity, not blindly follow signals.

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6. How to Use This Strategy Successfully

1. Only engage when a clear trend exists.
   No trend → no edge.

2. Use zones as context, not prediction.
   They tell you where price sits inside the move.

3. Follow the trend, never fight it.
   Breakouts and continuations both move with the direction.

4. Rely on the structure.
   The trigger, target, and invalidation define the opportunity clearly.

5. Pay attention to status.
   Even a good trend can have poor pricing.

6. Don’t force trades.
   If trend, structure, and pricing don’t align, step aside.

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Final Thoughts

This strategy is built on clarity, structure, and discipline:

• Identify the direction
• Understand where price is
• Look for a zone transition or a continuation
• Use objective levels
• Weigh cost before acting

It avoids predictions and focuses on what the market is actually doing.
For new traders, this creates a stable foundation — one built on rules rather than emotion.