good upside potential or good breakout? which is better for a short uptrend???

jamesj188

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hey everyone, please comment.

considering nothing else,
Is it better to take a trade that has great upside reward (ie the next resistance levels are far upwards of its current price)
or
is it better to take a trade that has just broken out of resistance????

Which is more likely to go into a short uptrend so you can scalp into????
 
good questiuon, going on a bit of a drunken ramble ill say this:

now look when you draw in support or resistance lines it can be dead easy to see from a graph. but the line on the graph isnt the only thing mate!

now look "support and resistance" are really stupid names for this:

* areas of responsive activity
(like its gone up too much so sell it in size)

* areas of exhaustion
(like its gone up too much and no one is buying OR selling)

then after that, you have these same areas where orders are clustered - like on a resistance level youve got

* stop buy market orders from people who are short
* stop buy orders from people trading the breakout
* sell limit orders from people taking profits
* sell market orders from people who are fading it

now the trick, IMVVVVVVVVHO, is to see that it isnt really "resistance": at all, but it will be what it will be from the result of all this stuff going on before and after it gets there.

like you mite have someone with big limit offers going in to the offers, so the "resistance" wasn't tested but the action was result of orders from this level even existing (be careful when this happens btw cos it means someone will puke the other side, my rule of thum is "resistance" that has been broken and didnt follow thru is safer than a level someone is protectine with LOADS of stops other side cos you will know you are wrong at the same time as loads of other orders and its basically not a good position to be in)

so anyway mate sorry after all that I forgot your question but my general advice would be when you are lookin at a "resistance" or "support" level is to ask

"are there lots of stops (first exit, then exit( the other side? like daily highs lows etc".
"does it look like someone is protecting / defending / exiting a position before it?"?

because I mean in times like this, the market is IMO a fight between the people wanting to go trigger orders vs volume.

obv if like central banker or whatever the forgert all this.


thanks for the fish :)
 
hey mate, i tried reading your post and couldnt understand it and I doubt anyone else got it either ahah....if you can just shorten the answer in one sentence or just say which is better, that would be great!...i know the answer might not be that simple though.

anyone else?

a friend of mine told me "If the upside potential is there then I don't think it matters whether it is a channel trade or breakout."
 
Hey Dash, nice write up Buddy, I hear what your saying..

Let me try now.. Before making any trade, you have to kinda have a feeling for how much rope the trend or breakout has, like forker said, the lifecycle of the trend is very important. If you dont have a general idea of how far it can run, then its a bigger risk, either way..
 
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