Risk management on breakout trading

[Leopard9]

I would do the following

1. Set profit target at the next retracement line
2. Trail by a certain dollar amount (or price price action levels) so I atleast make money on the trade incase price reverse.

Both 1 and 2 leads to making money. And the goal is to make money.


Allsssooooooo, in my journal or tracking spreadsheet, I am tracking to see what happens when I leave stop loss and predetermined profit target in place and DO NOT exit. I want to know how much money this makes over time as well versus the trailing way. It is all testing and observing.

Write down all the ways you want to manage the trade, and track the outcome in a spreadsheet. After about 200 trades, you will know what works best.

True. Good advice. I started a journal but more focused on the psychological side. You do your tracking on excel? Where can I find a template?
What happened after was I exited on break even. Unfortunally this was a false breakout and I did not reverse. What happened next...

 

[Stockolio]

Hi guys. Im struggling to create a rule on breakout trading for longer holdings. I would like to ask you how you manage risk there. For example If it goes in your favor and signals a reversal on a short time frame do you stand your ground with your stop or trail it? Sometimes Its possible to antecipate and get a better price before, sometimes its better to wait for confirmation. What say you?

Let your runners run... You have to know which have more momentum to push and which don't have much more legs and take profits, but this is during normal times

For the current sentiment we are in, nothing matters except political. Do not bother with charts to tell you anything even in regular times, much less right now. You can't come close to timing anything at the moment and do not try, more people on the sidelines or in longer options it seems. There's less volume less liquidity, more illiquid raises volatility, current amount of volatility makes it a casino with PPT and front runners in charge

 

[Leopard9]

There is no such thing as a perfect exit on your trades. Like wanting to have your cake and eat it too! You have to decide between tighter stops to minimize giving back more of your profits or having looser stops to give your trade a chance to be a big winner or big loser. If it goes against you, you might end up a bigger loser. Of course, if it works, you might get a big winner as well!
At the end of the day, what matters is your edge. What is the size of your average gain vs your average loss. If it it multiples of your losses, chances are good you will make a lot of monies! I am assuming you are using proper risk management on your trades as well.

Yes its true. I´m still in the struggling phase. My system and intuition work perfect but I still have a lot of confidence issues and my psychology is not yet developed. Failing to act on the right time, overtrade, revenge trade, chasing, very tight stops etc. I still make a lot of mistakes but i´m putting a stop to it now.

 

[SimpleMeLike]

True. Good advice. I started a journal but more focused on the psychological side. You do your tracking on excel? Where can I find a template?
What happened after was I exited on break even. Unfortunally this was a false breakout and I did not reverse. What happened next...

Leopard9,

Yes, I track in excel spreadsheet nothing fancy.

Just write down on paper everything you want to know about your strategy as far entry and exit and make a column for it.

Just track how much money you would have made on the trade if you would have done X, Y, Z and so on.

 

[Leopard9]

Leopard9,

Yes, I track in excel spreadsheet nothing fancy.

Just write down on paper everything you want to know about your strategy as far entry and exit and make a column for it.

Just track how much money you would have made on the trade if you would have done X, Y, Z and so on.

Ok, thanks. Awsome.

 

[SimpleMeLike]

What happened after was I exited on break even. Unfortunally this was a false breakout and I did not reverse. What happened next...

So you should track:

1. how much money made by not breakeven, and trusting your stop loss.
2. Trading the reversals.

 

[SimpleMeLike]

Ok, thanks. Awsome.

Read other opinions as well, they may have good advice. But for sure, you can learn alot about back testing what if conditions and evaulate the results of each condition. I personally learn the most during the trade day and take notes.

 

[SimpleMeLike]

My system and intuition work perfect but I still have a lot of confidence issues and my psychology is not yet developed.

Leopard9,

I can definetly relate to this as well. I am learning that having confidence in what I want to do is very important. The lack of confidence leads me to miss trades and early exited. I believe the root cause of low confidence comes from lack of experience and trading. If I take 2000 trades vs 200 trades, I will have more confiedence. We gain more and more confidence by seeing good results from good experiences.

Lol, sometimes I fool myself by saying "if you had $1M in your trading account, would you take this trade you are hesitating on". lol

Hesitation and low confidence in taking trades is certainly battles we can't run from they most be dealt with.

I believe the best way to deal with them both is to take some time to write down different ways you want to trade breakouts. Clearly write it out like you are explaining this to a trader that trades for your making $100 a hour, it don't need to be perfect, but doable. If you paying someone $100 per hour to take trades for you, your ass will explain it to them with no room for error. But you taking the trades, so it doesn't need to be perfect.

After write out, back test it or forward test it for about 100-200 trades. During this process , I think you will learn more

For example, I trade breakouts too. I want to know how much money can I make if I enter on the first breakout bar, rather than waiting for retrace or 2nd or 3rd bar confirmation. Well, I have to calculate it out and evaulate the differences.

 

[victorycountry]

Hi guys. Im struggling to create a rule on breakout trading for longer holdings. I would like to ask you how you manage risk there. For example If it goes in your favor and signals a reversal on a short time frame do you stand your ground with your stop or trail it? Sometimes Its possible to antecipate and get a better price before, sometimes its better to wait for confirmation. What say you?

Longer holding? Do you work for a hedge or mutual fund?


You need to find out when the primary trend is likely to change. You are lucky because it is going to happen this month. Once you find it then you can hold your position until next year around this time. Good luck man

 

[Leopard9]

Leopard9,

I can definetly relate to this as well. I am learning that having confidence in what I want to do is very important. The lack of confidence leads me to miss trades and early exited. I believe the root cause of low confidence comes from lack of experience and trading. If I take 2000 trades vs 200 trades, I will have more confiedence. We gain more and more confidence by seeing good results from good experiences.

Lol, sometimes I fool myself by saying "if you had $1M in your trading account, would you take this trade you are hesitating on". lol

Hesitation and low confidence in taking trades is certainly battles we can't run from they most be dealt with.

I believe the best way to deal with them both is to take some time to write down different ways you want to trade breakouts. Clearly write it out like you are explaining this to a trader that trades for your making $100 a hour, it don't need to be perfect, but doable. If you paying someone $100 per hour to take trades for you, your ass will explain it to them with no room for error. But you taking the trades, so it doesn't need to be perfect.

After write out, back test it or forward test it for about 100-200 trades. During this process , I think you will learn more

For example, I trade breakouts too. I want to know how much money can I make if I enter on the first breakout bar, rather than waiting for retrace or 2nd or 3rd bar confirmation. Well, I have to calculate it out and evaulate the differences.

Let me suggest Brett´s book Trading psychology 2.0. Its online. Its simply brutal. And I mean brutal!