Trading Breakouts: A newbie question

F

funky

Hello all, I've been reading your forums for some time now and I think that there are definitely some people here that could help, so here goes.....

I've been trading for 2 months now, mostly on paper, with a subscription service that trades volitility breakouts/breakdowns. The service is quite successful; I have verified this in the 2 months that I've been with the service. My problems lay in the execution of the setups. My question are for those of you who employ this type of trading.

1. When a breakout occurs, what slippage do you allow? This is my worst problem, as I tend to think that the price 'gets to far away' from me, and never enter. Ironically, these seem to be the best trades.

2. I trade ISLD primarily, and thus trade almost always with limit orders. When a breakout starts, and the ask dries up, can you get filled better if you just put your limit order 2 or 3 cents above the current ask? Is there some sort of technique that people use with lvl 2 screens to execute breakouts easier?

3. Do you enter sometimes before the breakout; if you do, what strategies do you use? I notice that sometimes these setups are proceeded by consolidation right above/below the 34ema just after it is crossed.

4. Do you wait until a pullback? Sometimes the best trades never really pullback, and I wait for this to happen to no avail.


I'm suffering from triggeritis. Can't pull the trigger. I've noticied that when focusing on the level 2 screen as the breakout occurs, I tend not to take the trade because I see the ask dry up quickly. Somehow mentally this makes me a deer in headlights. My thoughts, however ludicrous, are that if I place an order now, I will get some partial fill (I usually trade ISLD), which will end up invaliding any profits due to my comissions. Then price moves away quickly and again, I see the price way above the 'recommended' slippage amount (which is .05 on my sucscription service's rules), and don't take the trade. Up it goes as I watch and frustrate.

This is obviously a mental block, but also a confidence problem in my execution. Any tips would be greatly appreciated. Any personal 'turnaround' stories similar to these problems would be better :) Once again, thanks for even reading this.
 
Not sure if this will help, but I too am fairly new to trading. I was having problems making trades on the fly and started using stop orders. Initially the commissions were higher b/c I had an account w/ Scottrade ($12/order vs. $7 per order), but I've since opened an account w/ IB and orders are per share w/o consideration for the type of order. Anyway, it forced me to decide the critical price level ahead of time. It was tricky at first b/c I was second guessing what the critical price would be, but I stuck with what was comfortable. Eventually I started feeling better, which is not to say I'm always right, but that I am confident enough to go with what I feel.

I should note that I use a mostly discretionary system. I also only use EOD data to swing trade.

Hope that helps,
RLB
 
Easily Cured...

Cost about 10 bucks an hour. Plus supplies.

Have someone monitor you while you trade.

Pay them ten bucks an hour and whenever you hesitate and freeze up, the payed monitor hits you in the head with a wiffle bat purchased from a local walmart.

Do this for the whole day. You should be cured.

Repeat if neccessary.
 
If you are having trouble pulling the trigger then you may be trading too large a size for your current comfort level. If this is the case then I would suggest using a per share broker (IB for example) and trading a small enough amount of shares where the outcome won't really affect your capital base either way. If you are profitable at that level for a while and don't suffer triggeritis then increase your share amount. Continue to do this slowly while staying within your comfort level. As I (and I'm sure most others) have found out, trading is a marathon, not a sprint.
 
Quote from Ken_DTU:

Trading from Honolulu, Hawaii - "early to rise, early to golf".. land of hula skirts and high taxes.
More...
Hey no biggy.... trading from Columbus is just like Honolulu except you guys have the volcanoes and ocean is all. And it's a little warmer there usually, but other than that it's pretty much the same. :eek:

Slippage becomes more important as the profit objective becomes smaller. If you are looking to climb aboard a lengthy intraday trend, then slippage is far less important than if you are trying to capture the next 13-tick break.
 
I don't trade stocks so I don't know how feasable this is, but in the ES I've used buy stop limit orders. You know what the breakout point is so that is the buy stop and you use the stop price plus 0.05 as the limit price. Enter this order in ahead of time so that when the breakout occurs your order is automatically entered. This will eliminate your hesitation.
 
Better to be overly cautious than to be trigger-happy and trading too recklessly.

You may indeed be trading something too big. Start out with something small, small lots, dip your toes in until you get comfortable.
 
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