Breakout Trading using Time and Sales

This is a discussion on Breakout Trading using Time and Sales within the Trading Journals forums, part of the Reception category; This is one of the trades I took today, BRCM. There was clearly strong resistance at the $30 decade number. ...

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Old Sep 11, 2009, 4:46am   #1
 
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Breakout Trading using Time and Sales

This is one of the trades I took today, BRCM.

There was clearly strong resistance at the $30 decade number. As the stock broke out at 1:40pm EST, it did so with strong force, as evidenced by the Time and Sales. Usually, stocks that break strong areas of support/resistance come back to re-test those areas. I waited for this re-test, and it was clear previous resistance had now become support. Once the 1:45pm candle broke the prior candle's high and Time and Sales confirmed my entry, I got an entry at $30.10. To add further to this high-probability trade, the NASDAQ 100 E-mini futures had broken their previous days high with strong conviction.

Exit was at $30.35 (as can be seen on the chart on the red cross hairs) due to massive selling pressure on the Time and Sales, or one could have trailed the stop using the EMA(10), which would have provided an exit at $30.36.

If trading 500 shares, this would have yielded $125; if trading 1000 shares, this would have yielded $250. Not bad for about 20 minutes in the market.

Thanks for reading!
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Old Sep 11, 2009, 3:32pm   #2
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wow man this thread will be of great use to me! keep it up
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Old Sep 12, 2009, 12:47am   #3
 
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amit1986 started this thread Thanks Tajammy! I hope it helps!
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Old Sep 12, 2009, 1:25am   #4
 
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amit1986 started this thread The Limitations of Time and Sales:

While Time and Sales does add significantly to the probability of a trade working out, it should always be used relative to the stock being traded. For most people with relatively little experience in tape reading, Time and Sales can appear to send the wrong message for stocks that trade with high volume on an everyday basis. An example of this includes stocks such as MSFT, ORCL, and MGM.

Generally speaking, stocks that average 30 - 50 million shares everyday should be avoided as their message on the Time and Sales screen can be misleading. You may see 20 large orders go through at the bid, but this may not mean that the stock has enough momentum to confirm a breakout.

An example of one of my trades today was MGM. Prior to entry, the stock was displaying a clean, trending chart. Time and Sales showed very strong buying pressure, with large orders being hit at the ask. Momentum was clearly there. I took an entry at $12.15, watched it shoot up to $12.23, and then saw similar selling pressure building up. As price fell, I was quick to get out at breakeven on this trade, losing only the commissions (which does not come out to be much with a broker such as Interactive Brokers).

MGM then continued to break again 10 minutes later with similar momentum, but then reversed. As I watched the Time and Sales, I noted that almost every trade that went through was a large trade. In fact, it was rare to see trades less than 3000 or 4000 shares in size.

Prior to taking a trade, it can be useful to see the average daily volume over the last couple of weeks on a stock from websites such as Yahoo! Finance - Business Finance, Stock Market, Quotes, News.

Lesson: Avoid stocks that trade on very high volume. Stick to stocks that trade less than 10 - 15 million shares on average per day.
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Old Sep 12, 2009, 9:41pm   #5
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"Time and Sales showed very strong buying pressure, with large orders being hit at the ask. Momentum was clearly there. "

good trae by the looks of it, but my question is that why would you go long at a breakout whenever large asks are getting hit- couldn't this be the stop losses from shorts as there seems to be some resistance at 12.15 ?
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Old Sep 12, 2009, 10:32pm   #6
 
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amit1986 started this thread Hi,

Occasionally, as prices do break areas of important support/resistance, stops are hit. An example of this is the previous day high and low prices. Traders usually place stops a cent or two above (previous days high) or below (previous days low) in the event these areas are penetrated. So, if you take a long after the price breaks above yesterdays high, for example, the stops that get hit by those who have placed stops at that area will add further buying pressure to the price. This will act to drive the price higher.

Hope this helps!


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Originally Posted by TAjammy View Post
"Time and Sales showed very strong buying pressure, with large orders being hit at the ask. Momentum was clearly there. "

good trae by the looks of it, but my question is that why would you go long at a breakout whenever large asks are getting hit- couldn't this be the stop losses from shorts as there seems to be some resistance at 12.15 ?
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Old Sep 13, 2009, 12:07am   #7
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ya i know what you are saying but my point is how do you know if a breakout is genuinely real or whether it is just being temporarily driven by stop losses! i mean if you knew where stops are being hidden you could just place a buy/sell stop to scalp a few cents .

But from what i can see it seems as if you are following trend days and taking little bits out of them rather than scalping small breakouts so this isn't really an issue
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Old Sep 13, 2009, 2:02am   #8
 
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Post Re: Breakout Trading using Time and Sales

amit1986 started this thread Hi,

Unfortunately, you can never know for certain whether a breakout will be genuine. Most of the time, a breakout may be not confirmed as a "genuine" breakout from reading the tape and it may be a false breakout (aka, a fakeout). The best thing to do is to follow the rules and take an entry whenever you justify a breakout but if it reverses and goes against you, be quick to get out with as small a loss as possible.

There are other cases, though, when a breakout doesn't have enough momentum behind it, but still continues for several cents in the breakout's direction.

Scalpers usually have a different perspective when reading Time and Sales since their objective is to get in and out as fast as possible. I usually like to ride the entire wave .


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Originally Posted by TAjammy View Post
ya i know what you are saying but my point is how do you know if a breakout is genuinely real or whether it is just being temporarily driven by stop losses! i mean if you knew where stops are being hidden you could just place a buy/sell stop to scalp a few cents .

But from what i can see it seems as if you are following trend days and taking little bits out of them rather than scalping small breakouts so this isn't really an issue
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Old Sep 21, 2009, 9:30pm   #9
 
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very nice...very nice indeed
od aveh fg?

keep up the good stuff
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Old Oct 2, 2009, 7:53pm   #10
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where'd he go?!?
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