How do you pick a breakout?

[cashmoney69]

If you use indicators or not, when a stock is moving sideways, and indicators become useless, how can you tell when a breakout is going to happen?

In my limited experiance, looking at the candes is useless too because all I see are doji and spinning tops, one after another.

 

[CaptainObvious]

This a kind of a horse shit example but it should give you the idea. Just put it together on the fly so don't crucify me for exact S/R numbers.
The chart is of the NQ, but the principle is the same.

 

[jficquette]

Quote from cashmoney69:

If you use indicators or not, when a stock is moving sideways, and indicators become useless, how can you tell when a breakout is going to happen?

In my limited experiance, looking at the candes is useless too because all I see are doji and spinning tops, one after another.

For fun, try picking tops and bottoms. Come up some event that only happens.5% of the time, 3std move.Then watch what happens if a stock hit that target. Start slow and add every factor of your move. Say when it goes another .25 of he 3std factor or .5 etc. Use weekly or monthly support resistance as targets.

Play with it.

Check the news first. All bets off on first day moves based on earnings etc. Also stay away from buyout mergers.
If you have big move with no news then check when earnings are coming out, if within the next week or so then the move is on earnings expectation and not a good candidate at normal entry, just want a little longer or wait till next day.

John

 

[5Pillars]

Quote from cashmoney69:

If you use indicators or not, when a stock is moving sideways, and indicators become useless, how can you tell when a breakout is going to happen?

In my limited experiance, looking at the candes is useless too because all I see are doji and spinning tops, one after another.

Market Delta is the only thing I have ever found to measure the strength of "initiated" moves at support or resistance. It is also the only tool I have ever trusted to visualize "shifts" in buying or selling in sideways congestive periods prior to the breakouts. We had one example today with the ES at the LOD price area..........

http://www.charthub.com/images/2006/09/11/ES_317_VB_9.png

....and if you missed the first breakout pulse, here was your second chance entry to catch the ride...........

http://www.charthub.com/images/2006/09/11/ES_317_VB_10.png

 

[Hook N. Sinker]

Quote from cashmoney69:

If you use indicators or not, when a stock is moving sideways, and indicators become useless, how can you tell when a breakout is going to happen?

I can not predict the future and can not tell "when a breakout is going to happen". I wait until price increases above some historical high price and then I buy.

I wait until the price declines below some historical low price then I sell.

I don't risk more than 1 % of equity on a single trade.

The hard part is sticking to the system during losing streaks.

Backtesting helps me a lot. I think this thread is helpful: http://elitetrader.com/vb/showthread.php?s=&threadid=62291

 

[mwahal]

Why not look at Donchian channels ? And read the Original Turtle Trading System. Their website is now charging a *suggested* 29.95$ donation. But if you google it, you should find the free PDF file on first page of the results.

 

[BlowFish]

Place a pair of stops in a bracket just outside each side of the range have fun guessing which one is going to trigger.

If one hits and there is no follow through (sharply rising volume, momentum builds, spike in delta, wide bar etc.) reverse right there and then. You will probably have an optimal entry for a break out on the other side or the range.

some people wait for second time through so as not to get caught up in a false BO.

Safest, wait for the break out and then trade the first pullback, on the breakout you want to see increase in volume good 'thrust' etc. The pullback should have narrow bars diminishing volume.

Of course when things are just 'choping around' it may be better to go watch a movie. Suprisingly often its suprisingly clear.

Cheers,
Nick

 

[Bitstream]

after a while un get a feel for it, many breakout setups are also repetitive.

check out this beauty and tell us what u see:

 

[Pekelo]

Quote from cashmoney69:

If you use indicators or not, when a stock is moving sideways, and indicators become useless, how can you tell when a breakout is going to happen?

2 same colored candlesticks touching the Bollinger band....

 

[illiquid]

Quote from cashmoney69:

If you use indicators or not, when a stock is moving sideways, and indicators become useless, how can you tell when a breakout is going to happen?

That's the thing -- if you knew the answer, you wouldn't be trading "breakouts".

Also, you'd know which "breakouts" to hold, and which to flip over short to profit off the other "breakout" traders.