Trading Breakouts: A newbie question

Quote from macal425:

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.
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In my humble, relative newcomer opinion, this is the best advice yet.

Per share broker + comfortable size will go a long way to reducing your stress.

Don't go for the home runs - sheesh, is there such a thing anymore on an intraday basis? This is indeed a marathon and not a sprint.

When I finally got smart and realized that, I started from scratch and began trading in 100 share lots, with my goal being to slowly work my way up in share size. Of course, the gains weren't big, but more importantly, neither were the losses.

I gauged my success and failures not in total dollar amounts (again, because they were relatively small), but in points, i.e. my journal would note that on that particular day I had one trade where I made .30, two trades where I made .25 apiece, three trades where I lost .15, and two break-evens. Comes out to positive .35 minus commissions. Trading in 100-share lots, that only comes out to $35 before commissions, but I kept in mind that as I worked my way to larger size, that would equal $350 if I was consistently trading 1000 share lots.

When you do well it's easy to get super-confident and increase your share size by a huge amount. Don't! That's usually when you get humbled rather nastily.

When you get comfortable with 100 shares and you're consistently more positive than negative, move up to 200 shares, then 300, and so forth. Some trader's say you should increase size by the following formula: Trade 100 share lots until you can make $100 a day; 200 share lots until you're making $200 a day, etc, etc. Basically net 1 point a day. Well, the market has changed, volatility has dried up, blah, blah, I don't know if that's still a valid formula (comments, anyone?). Personally, I think making .50 a day in this market is extremely satisfactory...I've heard of other traders doing 100 share lots for a couple of months, then every month upping it another 100 shares until they reach their comfort level....Anyway, you'll know what your comfort level is when you stop hyperventilating during each trade!

Just my .02

Ask a lot of questions, read all there is, and remember to KISS.
All the best. :)
 
I second the comment that you may not be comfortable with the size you are trying to trade, but more fundamentally, maybe you are not comfortable trading breakouts. There are plenty of other ways to trade that might work out better for you. It might also have something to do with trading some service's calls and not your own. My advice is develop your own style and quit trying to rely on someone else's picks.
 
I'm sure that your system takes direction into account somehow.

You can always kill three birds with two stones on BO's.

Entry on a BO is the market's job. No one is allowed to do that. Your being is explaining that to you in subtle ways as you tell us.

What you can do is really get an edge here. Look at how you would set stops for managing the protection you want on a trade. Once you determine the particular value, use it twice.

Determine the centering value from which the entity is going to BO. Off set entry orders (long and short) away from that centring value.

Wait. The market will always take you in in the right direction. And you have your intial stop protection in place as well.

When you get this down and you are in the groove, you will see you vaoided: scalping, failures to BO, the trigger pulling myth, and loosing a lot of money.

The idea that a person has to "pull the trigger" to enter is a myth of mediocracy. People who make a lot of money do not do the market's job ever. Try to be very very risk adverse and you will be in a place where you no longer usurp the market's jobs and responsibilities.
 
jack,

very well put....i'm seeing that instead of watching 'if' the market breaks, i should be watching 'HOW' the market breaks.

another problem i need to fix is that while watching lvl 2 for these cues, once i have determined that the breakout is occuring, i have to put my order in and transfer my view to the charts. i get caught up in the furry of lvl 2 too much.

once again, thanks everyone for their wisdom :)
 
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