how to manage false breakouts on NQ ES

P

pawpaw

Hi
I'd really need to get suggestions and share ideas on this matter because that's my weak point in trading the NQ. I usually trade on breakouts of supp/res points, but I often get stopped by false breakouts which are quite common on the NQ (as in many other markets). How do you manage false breakouts? Do you look for any particular confirmation signal after a breakout or just enter once the entry level gets broken?

Any "sound" comments are welcome...:D :D

Thanks
Pawpaw
 
I am also suffering from this problem - especially recently. I usually play continuation patterns on 1&3 min charts - but recently the continuations have been few & far between. What I'm working on is this:

1. only play if there's a trend
2. get in to the break out on the first tick (using stop to enter)
3. have a very short time stop so that I get out quick if no follow through - don't wait for my price stop to be hit

It's too early to tell if this is going to turn things around for me.
 
Quote from pawpaw:

Hi
I'd really need to get suggestions and share ideas on this matter because that's my weak point in trading the NQ. I usually trade on breakouts of supp/res points, but I often get stopped by false breakouts which are quite common on the NQ (as in many other markets). How do you manage false breakouts? Do you look for any particular confirmation signal after a breakout or just enter once the entry level gets broken?

Any "sound" comments are welcome...:D :D

Thanks
Pawpaw
More...

Stop trading breakouts, start trading retracements.
 
Quote from Ditch:



Stop trading breakouts, start trading retracements.
More...

Smart, but you buy retracements on some sort of breakout too, say above or below some MA or a pivot. That's my method pretty much too, then I trail it with PSAR.
 
Quote from Ditch:



Stop trading breakouts, start trading retracements.
More...

Bingo! This, more than anything else, turned me from negative to positive. It allows tighter stops with the possibility of a high winning average. Trading a breakout, requires a wide stop, or your winning ave is going to be low.


Jay
 
First of all, I'd have to agree with the others. You'll probably
be better off trading pullbacks. But, if you just insist on trading
breakouts, this is how I would do it. BTW, just because my
moniker is breakout, doesn't mean I profess to be an expert on
breakouts, that's just a name I picked. I'd use a 133 Tick chart.

Here's an example of 3 setups this morning and then I'll
post a blow-up of the last trade, so you can see it closer.

Keep in mind, this just happened to be 3 perfect setups this morning. You'll get a lot of losers. So, you'll have to let the
winners run.


Hope this helps.
 

Attachments

Re: Re: how to manage false breakouts on NQ ES


--------------------------------------------------------------------------------
Quote from Ditch:



Stop trading breakouts, start trading retracements.
--------------------------------------------------------------------------------





Quote from Jayford:



Bingo! This, more than anything else, turned me from negative to positive. It allows tighter stops with the possibility of a high winning average. Trading a breakout, requires a wide stop, or your winning ave is going to be low.


Jay
More...

Thanks for the reminder, guys. I traded breakouts for years and got my ass handed to me time and time again.

Lately, I've started trading retracements. Although still struggling with it, I've hit many trades that have taken off.

My problem is trying to break the old bad habits. I'm so used to breakouts/momentum trading, that I occasionally trade them and I tend to put on bigger size than I do with retracements. So when a breakout trade doesn't work, it undoes the profits from three of my retracement type trades.

The problem now, is that the market isn't making very good retracements (on the weekly charts - I'm swing/position trading). I'm tempted to just jump into some of these high-flyers on pullbacks on the daily chart, but I know I'll just get burned if I try to play that game again.
 
pawpaw,

As the others have suggested, try trading pullbacks. Wait for the breakout to occur, then buy on a pullback to the breakout level to enter, and use tight stops (below previous correction, etc.) Then, if/when the trade goes your way, move your stop to below the new pivot that was formed.

By waiting until after the initial breakout, you'll have more of an idea of whether it is a valid breakout, or just stop running.
 
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