how to manage false breakouts on NQ ES

Quote from sempai:

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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When it pulls back from the breakout, what validates an entry (ie. is it a pullback, or a failure)?

And when in the pullback do you enter?
 
One example of when to buy (if doing a long) when a breakout pulls back is:
Go down to a smaller time frame and trade when the product breaks a trend line or moving average. Even better yet, let the moving average or trendline cause a little pause or "handle" and trade when that breaks.

Here a two links to charts that I have posted giving this exact example. This is a daytrade from a 5 minute chart. It looks at the 1m chart for entry. If you are trading weekly, go down to the daily or if trading daily, go down to 60m chart.

http://www.elitetrader.com/vb/attachment.php?s=&postid=253873

http://www.elitetrader.com/vb/attachment.php?s=&postid=253874

(don't know how to make these direct links, just copy them into your browser of course)
 
Maybe this could help.

pretzel


Quote from arzoo:




When it pulls back from the breakout, what validates an entry (ie. is it a pullback, or a failure)?

And when in the pullback do you enter?
More...
 
Quote from arzoo:




When it pulls back from the breakout, what validates an entry (ie. is it a pullback, or a failure)?

And when in the pullback do you enter?
More...

You might try something like this for an entry. This is a 133T chart
with a 20 period price channel and a 20 EMA. Here's 5 setups
from yesterday.
 

Attachments

Quote from Breakout:



You might try something like this for an entry. This is a 133T chart
with a 20 period price channel and a 20 EMA. Here's 5 setups
from yesterday.
More...

Breakout,

When you enter the trades, do you enter -

1. as soon as the low touches the EMA?
2. wait for the bar close and enter on the open of next bar?
3. wait for one or two bars before entering?

How do you enter the trade?
1. market order?
2. wait at the bid?
3. order waiting at the EMA right after the breakout?

Do you differentiate whether a touch is
1. the bar low crossing DOWN the EMA?
2. EMA crossing UP the bar low?

Within a trend, after how many retracement setups would you quit?

And, what is your stop and target?


Thanks,

pretzel
 
Quote from pretzel:



Breakout,

When you enter the trades, do you enter -

1. as soon as the low touches the EMA?
2. wait for the bar close and enter on the open of next bar?
3. wait for one or two bars before entering?

How do you enter the trade?
1. market order?
2. wait at the bid?
3. order waiting at the EMA right after the breakout?

Do you differentiate whether a touch is
1. the bar low crossing DOWN the EMA?
2. EMA crossing UP the bar low?

Within a trend, after how many retracement setups would you quit?

And, what is your stop and target?


Thanks,

pretzel
More...


First of all, let me say, trading isn't a science. A large percentage
is art. So, what I show you on these charts isn't gospel. It's
just the gist of what I try to do when I trade. Some days I follow
the rules just like I've shown on the charts. Some times my gut
feelings have me doing something else.

But, if you're just starting out, I think these charts wil be helpful.
The first chart is how I would trade if I was trading the pullback
of a breakout.

The second chart is what I'm actually doing right, now.


1. I like to enter when the bar "crosses" the moving average. This is an "anticipatory" entry.

2. I use market orders. But, that's only because I'm lazy. You
can guesstimate where price will cross the ma, and use a
limit order and get the fill at your price.

3. For a long, bar crossing down, for a short, bar crossing up.

4. I would take all the setups. I know I'm going to take a loss
eventually.

5. My initial stop is 5 ticks. But, since a large percentage of my
trades usually go in my favor at least 3 ticks. I'll pull my
stop up, so I average about 2 ticks on my losers. So, my profit
objective is somewhere around 5 or 6 ticks on the first contract
and 8 to 10 on the second. I try to keep my average profit/loss ratio around 3-1.

Hope this helps
 

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can you actually have a trading strategy that implements breakout entries and pullback methods?

or will you just confuse yourself doing so and get into more problems?
 
Quote from arzoo:

can you actually have a trading strategy that implements breakout entries and pullback methods?

or will you just confuse yourself doing so and get into more problems?
More...

My main-setup is the retracement, but i also trade breakouts from tight congestion patterns like triangles, however i avoid breakouts like new HOD and LOD.
 
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