This is basically an extension of understanding orderflow trading (If you want to trade these breakouts, I recommend you do some research on it). So before I get too technical I’m going to start off with an example.
You have a hot knife, and you try to cut through butter, and dirt. Obviously, its a lot easier to cut through butter, because there is less resistance right? And after making that cut, you want to pull the knife back out. Is it easier to pull it back through the cut you made, or by making a new path?
Thats the theory being mass and freefall/free rise. When price encounters mass (other orders that goes against you), it slows down. When it has no resistance (you can call it a vacuum), price will speed up. Obviously for this, you have to be able to reasonably predict where the orders are hiding.
Why does this work?
The concept of technical trading, is the fact that you place your trades, based on past activity. In otherwords, you look at where price HAS BEEN in the past. If price hasn’t been to some spot on your chart, the chances of people placing orders there are very slim, because if there is no support or resistance there, how will you know if there is a bounce or a break? FreeRise and FreeFall takes advantage of this fact, and uses it to gauge the strength of a move.
When price travels in freefall through a vacuum(and vice versa), if it hits significant support, it will rebound up at a similar pace (because the knife already cut through all the orders, so theres none left going the opposite direction).
The reason why this concept works so well for my style of trading, is because the more consolidation there is, the more orders there are at the ends of a well defined box.
Now.. please wait while I hunt down and draw some pictures to demonstrate for you guys.
Red Circles are Mass, Green circles are Freefall and Freerise.
FreeFall/FreeRise situations are not that common. Free space areas are areas that have no orders, so you can see in the bottom picture that the reversal was similar in strength from the upswing. Also notice on the bottom picture, that FreeRise stops when it encounters the huge chunk of Mass at the top, where it abruptly changes directions
One more picture from GPB/USD. I put a “look here” because this is one of those important things to watch out for- Your knife’s initial cut (the pink circle), followed by pulling the knife out the same way (the freefall zone). Only the right side is considered Freefall, because the strenght of the pink circle indicates that whole section has lack of orders, so price will move drastically through this region.
So although the pink region is not considered Freerise due to the heavy amounts of Mass surrounding it, it does indicate lack of liquidity in this region.
The most important rule of spotting this formation is this: FreeFall/FreeRise MUST show a huge candle, or a huge series of candles in comparison to all the candles around it. There are NO retracements during this time, meaning all your candles are the same color.
One more FreeFall Example: