High probability Breakouts

[BONECRUSHER]

There are no obvious high probability technical setups. Any indicator or pattern setups that work are probably a very well guarded secret.

The obvious highest probability breakout setups are for events, e.g. earnings reports, FDA approvals, M&A announcements, etc. The rub is when you have a high probability event that everyone is aware of, the cost of the trading instrument (options for a long straddle/strangle) rises to offset any edge.

Just another reason why successful trading is hard, as if you needed me to tell you.

My favorite setup...inconspicuous and highly probable. I trade breakouts frequently enough, but never the kind that you'd read about in a book. I would never trade a "common knowledge" support or resistance unless it was by accident...this does happen sometimes when I check a more conventional type of chart at the end of the day. I must admit that terms such as obvious, common, conventional, similar, simple, typical, accepted, and standard freak the hell out of me... I'm glad those days are long gone! Good luck with whatever approach you use!

 

[southall]

High probability breakouts.. that would be the holy grail, everyone would be easy rich trading.

Sadly if you want to be a profitable trader then you have to trade low probability breakouts like most other profitable traders, the market eventually rewards risk takers who are prepared to suffer long drawdowns. People who want to avoid long losing streaks end up avoiding the big rewards as well.

"You cant tell till you bet", the future cannot be predicted with high accuracy, there is no way of knowing before hand which breakouts are the best ones.

 

[BONECRUSHER]

High probability breakouts.. that would be the holy grail, everyone would be easy rich trading.

Sadly if you want to be a profitable trader then you have to trade low probability breakouts like most other profitable traders, the market eventually rewards risk takers who are prepared to suffer long drawdowns. People who want to avoid long losing streaks end up avoiding the big rewards as well.

"You cant tell till you bet", the future cannot be predicted with high accuracy, there is no way of knowing before hand which breakouts are the best ones.

I agree with your post, but in my opinion high probability doesn't mean EASY RICHES...it still takes skill and experience...especially with a R:R of 1:1. Someone less skilled would let the profit slip away frequently...even though it was there for the taking. But I do agree most profitable traders will end up adhering to your "long drawdown/big reward" path. Just my 2 cents.

 

[Buy1Sell2]

One example of a higher probability breakout would be one where you have a deeply oversold condition on a shorter term timeframe and the longer term is in uptrend. A breakout of the oversold area is a higher probability than a breakout from an overbought area given the same uptrend.

 

[Buy1Sell2]

Truth is though breakouts from any area are extremely easy to trade. However, you need to be prepared that the vast majority of them will fail . Thus it is counter intuitive. No one likes to lose. So, when in a winner, let it run. This where the money is made. You must exercise Prudent Risk Management to be successful with trading breakouts. Most will not be successful with breakouts---The Turtles were though.

 

[bigspeculate]

One example of a higher probability breakout would be one where you have a deeply oversold condition on a shorter term timeframe and the longer term is in uptrend. A breakout of the oversold area is a higher probability than a breakout from an overbought area given the same uptrend.

This is pretty sound strategy. But it's really more of a pullback method. Trading the return to the larger trend.

 

[Morpheouso]

I have back tested a Break Out Strategy I will be coding this weekend, tested it all the way back to 2003 I attached a table of my testing results, comments greatly appreciated. Stop and target are always 1:1 win loss ratio 57%, these figures assume 0.6 pip spread trading the EURUSD in IG.com and paying the 1 pip Guaranteed stop premium, the results also include deductions for roll over fees. Over 10,000 setups were tested.

 

[chenxin1984]

I have back tested a Break Out Strategy I will be coding this weekend, tested it all the way back to 2003 I attached a table of my testing results, comments greatly appreciated. Stop and target are always 1:1 win loss ratio 57%, these figures assume 0.6 pip spread trading the EURUSD in IG.com and paying the 1 pip Guaranteed stop premium, the results also include deductions for roll over fees. Over 10,000 setups were tested.

Does the 1 pip guaranteed stop premium work no matter what? If so, you just bet a ton before any major news. If you guess it wrong, you lose 1 pip. If you guess it right, you make xxx pips. The 1 pip guaranteed stop premium must cost a fortune to have, otherwise the broker is almost guaranteed to lose money.

 

[Visaria]

You pay 1 pip to guarantee your stop. The stop has to be placed at a minimum distance from your entry.

Also the broker may suspend guaranteed stops before major reports or political events such as elections.

 

[Morpheouso]

You pay 1 pip to guarantee your stop. The stop has to be placed at a minimum distance from your entry.

Also the broker may suspend guaranteed stops before major reports or political events such as elections.

Yes there is a min distance, but my stops are greater than this distance, if the broker (IG.com) were to reject my stop I would not take that trade.

No IG do not suspend guaranteed stops once they are set, and you only pay the premium if the stop is hit, so in principal it would be possible to exit manually and not pay the premium.