Trading Styles

Hello,

Allen, im curious as to how you play your support and resistance landscape in regards to when you think a move will bounce off of support or break thru that support. How do you decide to fade a move or play a breakout. In the emini I do really well trading the support and resistance levels when the market is in a non trending mode. What percentage of your trades are counter trend trades versus a breakout play? Also, what indicators do you use to help identify a possible bounce or breakdown at a particular support or resistance area. Im basically a counter trend trader but I realize the need to incorporate breakdowns and breakouts into my game plan.


Best regards,

Trapper
 
I will attempt to answer all your questions in a general statement.

I use several determining factors to justify playing a breakout or breakdown as opposed to fading the move expecting it to fail.

First of all is moving averages, I will only play a breakout of a price range if we are clear of moving averages generally on the 15 and 60. The number one thing in playing breakouts for me is confluence. I need more than just one reason to play a breakout. I need to see a bullish chart formation, lack of overhead moving averages, narrow range prior to breakout, and reasonable stop from entry to justify the attempt at the target. This may sound odd or overly simplified but here goes, if the proper entry for a breakout requires a stop that does not justify the target it is more apt to fail. Meaning, if a breakout occurs over 1586 and you target next resistance of 1595-1600 but due to the lack of one of the items I mentioned before ( above ) you need to place a stop at say 1574 then this does not justify the entry. Two choices occur; 1. let the move break and fade it after first sign of stalling. 2. let it break and wait for a pullback that offers proper risk/reward if you don't get it, move on.

There is always another trade if you don't get your entry that offers the proper risk parameters. Never be afraid to miss a move.

Allen
 
Hey Allen,

Thanks for the reply. Your info will add to my trading arsenal and I appreciate it very much. I wonder if you could post one of your pre-market trading plans just to give a peek as to how a successful trader plans for the trading day. Actually, I would like to see pre-market plans from any traders that might like to post them.


Best regards,


Trapper
 
Somebody mentioned on elite trader a while ago that “the more obvious a chart pattern set-up is the less likely it is to succeed”.

I don’t understand this because if there was for example a really clear rising flag pattern and a nice solid round number resistance ready to break then wouldn’t everybody buy the stock as it breaks out because everybody is thinking the same thing.

wouldn’t there be loads of buyers and few sellers making the stock rocket? Or something, err did that make any sense?
:(
 
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