Breakout Trading - Smart Play or Fool's Game?
- Thread starter Money Trust
- Start date
Will talk about what we knew - heading into today
(know??? this is trading - how can we know anything)
Before I talk about what was knowable heading into today..., allow me to discuss how I got there
I use 4 charts
1 min - microscope
5 min - trading
15 min - longer view
240 min (4hr) - my overall view - iow the universe I trade in
As a refresher - PA is contiguous..., not continuous - there are session breaks...., but it is all the same PA - no matter the chunks of time we choose to break it up in
The (my) universe;
What ever the universe is (ranging or trending) - so to must the predominant PA within it be
It the predominant PA within..., that creates / makes up the entirety of said universe
This true unless the universe in the process of evolving from one state to the next
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What was know about the universe heading into today
Price is in a range
The context (rectangle) is in sync with that range
The context, since it is in sync, can be leaned on
Has anything changed to place the universe in upheaval - no
Side note; that big ass up bar on the 14th came right after verizon announced aol's buy out
So given what was known - any reason - until proven wrong - to think the universe has changed / will change - no
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The potential RBO up..., I posted earlier today - which ultimately failed - occurred near the top of the universe's upper range (.28 cents short of it to be exact)
Anything up to that point change to cause price to BO of its current universe - not that was indicated in the PA - even though the PA leading up to that potential BO was picture perfect - in every way - within the 1M range
Problem was - that 1M PA was not in sync with the universe it was residing in
It why MTFA is so vital in this business
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Fast forward to now
So..., price (the universe) has been in a range...., and is still in that range
Any reason to think tomorrow will be different
Not unless universal upheaval occurs
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On a different note;
Now..., lets say the universe trending
Would RBOs - in the direction of the universe's trend - be more likely to work
Yes - but..., still must always be cognizant of where in the session / trend this particular range..., price is attempting to BO from..., has formed
Reversals are a fact of life - as are extended PBs
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One other aspect I need to touch on.., but not sure how deep I am willing to go with it
Intraday - price's bias
Quicker this identified - it the profitable way to trade
It can / does change throughout a session
Just because price headed in a direction - does not necessarily mean that is price's bias - traps do get set..., then tripped
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I still maintain ranges / volatility masks piss poor trading skills - and makes a real trader work exponentially harder
RN
One other thought
In a range universe;
Targets need shortened up
Stops need strictly honored.., and imo tighten (trade is going to work or not)
When near the edges..., don't count on a continuation - until / unless something changes
When price is in the middle of a range - that is no man's land - or rather suicide
RN
In a range universe;
Targets need shortened up
Stops need strictly honored.., and imo tighten (trade is going to work or not)
When near the edges..., don't count on a continuation - until / unless something changes
When price is in the middle of a range - that is no man's land - or rather suicide
RN
And a happy Memorial Day to you, RN
Okay. This has got me thinking. Thanks for clarifying and providing direction.
First, I would say diagonal and classical TA patterns (triangles, wedges) are a good edge in themselves, and yes, definitely BO oriented...
My sticking point is horizontal breakouts. Breakouts from V bottoms or ^ tops. Which ones rip, and which ones don't? I get the importance of time and volume. All other things being equal, one would assume an untested top or bottom would have more contracts placed at that top or bottom the longer it 'holds'....making an eventual break more likely to run. Volume would be a more direct measure of that same phenomenon quantified exactly. Whereas >time is a looser approximation. However, going back to your original post, which I should read again, you mentioned the weaker breakouts run stops......and here I am focusing on stop-running and weaving it into the qualities of a successful BO (time and volume). So perhaps my thinking is off. It must be, because I am no BO master.
I agree that PB's are a form of a BO. In my experience, the risk:reward profile on a PB BO is far better then a trend extreme BO. So I prefer to take my chance on a pullback, then on a trend extreme....
A28
How about tomorrow evening we break this down and discuss Sir
RN
BTW: One thing that comes to mind is that we're all of course trading breakouts in a way when it comes down to it. Everyone wants strong favorable moves away from their entry and closer to their PT (if any).
What I interpreted from the original poster's idea of breakout trading was specifically buy and sell stop type trading where one gets triggered on the final strong move that breaks out. That's what I think is a fools game more often than not.
What I interpreted from the original poster's idea of breakout trading was specifically buy and sell stop type trading where one gets triggered on the final strong move that breaks out. That's what I think is a fools game more often than not.
my 2c.
flat price directional trades - I never trade breakouts. on occasions I like to take the other side of the breakout and hold when the fail is confirmed.
spread positions - I like to take trades as price moves out of a consolidation, when my expected move is in its infancy. these trades tend to last days to weeks.
flat price directional trades - I never trade breakouts. on occasions I like to take the other side of the breakout and hold when the fail is confirmed.
spread positions - I like to take trades as price moves out of a consolidation, when my expected move is in its infancy. these trades tend to last days to weeks.