people buy breakouts because its easy. the exact same reason people do most things. easy does not cut it in this game or life.
regards,
surf
regards,
surf
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Why people buy breakouts
- Thread starter bigbrent701
- Start date
Quote from kowboy:
Thanks Bigbrent,
Appreciate your observations on breakout/breakdown trades. It would be helpful if this discussion were to continue:
1. How to identify/scan or find stocks prior to breakout and have them on a watch list of potential candidates.
2. What conditions the trader would want to look for prior to entering.
3. And finally the trade management once entered.
I find the hardest part of trading breakouts is to find enough stocks (based on the daily charts) to put on the watch list as potential breakouts. Most of the time, with only a handful of candidates, the trader ends up spending all day or several days waiting for one of these to breakout and confirm. I've not found a good scanning method for my own use and only several websites to get more than a handful of candidates at any one time.
Thanks
You ask three very important questions here.
1. I do not know and i have never been able to figure out how to screen/scan for stocks that meet this criteria. That question is the reason that I even started posting on ET years ago.
2. The conditions for entering could be a thread in its entirety but i will gladly elaborate in the next post I make on this subject so check back soon for my answer.
3. Trade management is very important and I myself find this to be the single biggest obstacle for me. How to manage your losses, open profits, and reentry are some of the most difficult concepts to master. I feel that managing losses is probably the easiest of these however how to handle open profits is the single hardest thing to do. At this point I am still searching for the answers to this question. I never claimed to be an expert in any of this but i enjoy intelligent discussions where we can all benefit from the ideas bounced off each other.
Surf, I didnt get around to that but yes I tend to agree that people buy breakouts because its easy. Its the most psychological soothing way to enter a trade.
CM no I am not a seasoned trader. I am looking for intelligent conversation on support and resistance with differentiating when to trade the breakout and when to fade the move. I am also looking to discuss quantifying the reward to risk ratio, and trade management. If you have nothing positive to contribute then just find another thread to lurk in.
More recent breakouts, some good some not so good.
http://www.amazingstocks.com/REPORT/aRESISTANCE_BREAKOUT.html
http://www.amazingstocks.com/REPORT/aRESISTANCE_BREAKOUT.html
Quote from bigbrent701:
CM no I am not a seasoned trader. I am looking for intelligent conversation on support and resistance with differentiating when to trade the breakout and when to fade the move. I am also looking to discuss quantifying the reward to risk ratio, and trade management. If you have nothing positive to contribute then just find another thread to lurk in.
Obviously you took my last post to be offensive, even though it wasn't meant to be. For that I apologize.
On a better note, I'd like to discuss breakouts with you, although it would probably not be within your best interest.......and rightfully so.
cm
Quote from Pa(b)st Prime:
These discussions are bullshit.
Seriously.
If a trader has consistently BOUGHT the market since 2003, whether on breakouts, fib retracements, off MA's, off pivots, off Jack or off the stars, he's made money. If a trader has looked for short opportunities using the same criteria that's worked on longs, he's been toast.
In other words if a trader has held a bullish bias over the past 4 years EVERY method has worked. Conversely for sellers nothing has consistently worked.
To make money the past 4 years and in the 90's hasn't been a matter of technique but of how bullish you are.
Of course when the market rolls over we'll hear about some really neat "back tested" short strategies.
S&P futures started in 1982. If there was a sure fire 100% a year "system" we'd have seen a guy take 10k in 1982 and run it into 160 billion by 2006. Given the 10-1 leverage of futures, a trader only needs extract 10% of movement per year to hit 100%. Yet NO ONE has ever pulled it off over a prolonged sample.
In answer to the question posed by the thread: Most buyers on new highs are either a. short covering stops or b. "Turtle" type trend followers.
Absolutely agree!!! We are in a bull-market and as long as you are long you should be fine. There is always a chance that some of the break-outs will fail but that is where stops and your position size come into play. As long as you take every break-out signal, you should come out ahead.
Although the market made a low in October 2002, looking at the high-yield funds, this bull market started in May 2003 and it charged ahead till May 2004. Some of the high-yield funds that I track have recently broken-out from a 3-year consolidation. S&P made the low in July 2006. This baby is going much higher.
My analysis could be totally wrong, there is where the stops and an exit strategy come into play. Till then I am buying pullbacks to support or break-outs to new high.
Quote from bigbrent701:
CM no I am not a seasoned trader. I am looking for intelligent conversation on support and resistance with differentiating when to trade the breakout and when to fade the move. I am also looking to discuss quantifying the reward to risk ratio, and trade management. If you have nothing positive to contribute then just find another thread to lurk in.
You just don't understand the word randomness, do you? Nothing "works'. By nature, it can't. Get that through your head.
Trading has never changed. It's all about spotting trends (often based on intuition, feel and intelligence) and position sizing. The move within a move stuff can occur in so many millions of different ways (literally) that the "results" of any given indicator, method, measurement and time interval is purely random.
You may think I'm being a prick with nothing to offer. Au contraire. I'm going out of my way to teach you truths it's taken me 23 years to discover.
Speculation is an art not a science. You're not one of the .00001% of participants using technology to capture a true arbitraged or fungible edge. You'll never survive smaller timeframes without edge and you'll never be sophisticated or in the loop enough to get edge. That's why you need knowledge edge. You need to know odds. You need to know inter market relationships. You need to relax and seek flow.
Forget the "tech talk." You'll discover a rhythm that can be seen technically.