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I almost NEVER see a false breakout;
SEPT\ MAR maybe............................................[BUT i seldom track 5 minute charts, so its good i miss a lot of noise breakouts]
trading on a breakout
- Thread starter notafool
- Start date
I almost NEVER see a false breakout;
SEPT\ MAR maybe............................................[BUT i seldom track 5 minute charts, so its good i miss a lot of noise breakouts]
While this sounds like good advice at first glance, this breakout strategy (buying/shorting before the actual breakout) produces the worst results overall, despite the seemingly better risk/reward ratio.
There is no way to safely increase win % beyond a certain percentage. My breakout strategy has a 65% win rate. It uses advanced hedging with multiple currencies. All breakouts are taken with equal risk vs reward AFTER the breakout occurs. Not before, not on pullbacks.
However, it does NOT blindly buy each and every breakout. That would lower the win % to 50%.
However, it does NOT blindly buy each and every breakout. That would lower the win % to 50%.
Excellent post Oraclewizard77
And studies show that the most powerful breakouts do not pullback to the breakout line.
What timeframe charts do you like to trade?
How long do you generally hold?
Do you use stops and targets?
Tue Padutrader, traders should look for breakouts (from rectangle or triangle formations for example) when the trend is already up (for long positions) or down (for short positions).
Playing breakouts in a range market is a losing game, as you probably know.
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Good point.
Believe it or not, I found a way to eliminate more than 75% of these false breakouts...
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yes once a strong break out, is in evidence, WAIT for a pull back and a DB [DT for short] to enter a position.......
you can enter on the break out itself , if you are willing to hold or add on, until the break out continues.
if it tries to continue and 'fails' then you can reverse the original trade.
if this trade also fails, then better to take a walk.
I got burned too many times buying the breakout. If I see it early enough I will buy with a trailing stop but my main focus is watching for consolidation after a top and then buying with the next volume/price increase, initially with a tight stop that gets moved up once I am solidly in the green. That's the easy way to trade a breakout. It is easy to catch it with your scanner on the first big push, and easy to get set for the second push. If it looks strong enough I will ride out the next consolidation and then sell after the third top or at a potential line of resistance such as an even dollar amount or a recent high or repeating high or the top bollinger widened out to 2.2 std. deviation. Or a doji that looks like a possible reversal. Anything that tells me that maybe it's done and getting overripe. Letting the breakout settle and catching the next push misses out on a lot of potential profit but it is a little safer and easier to catch in time to do some good.
Like deaddog said, a lot of really strong breakouts are plays in one act, and they top once and that's it. Doing it my way of course misses all of those but it just works better for me. There will always be another trade and since it isn't my full time occupation, I can afford to miss out on trades, and I have been under the PDT limit most of the last 12 months anyway.
Like deaddog said, a lot of really strong breakouts are plays in one act, and they top once and that's it. Doing it my way of course misses all of those but it just works better for me. There will always be another trade and since it isn't my full time occupation, I can afford to miss out on trades, and I have been under the PDT limit most of the last 12 months anyway.