Breakouts

Chad Seven

Active member
207 13
A few changes to the strategy

1. Replaced timed exists with targets. Target set at top of triangle + triangle height
2. Entry now set at top of triangle + 15% of triangle height rather than 20%
3. Stop now set at top of triangle - 5% of triangle height rather than 10%
4. Removed references to First Strike as my strategy no longer resembles it
5. I am now risking £1,000 per trade which on current account balance is 4%. This is too big but I am comfortable with the size for now. As my account grows the risk will remain fixed and decrease as a percentage with the aim of getting down to 2 - 3%.
 

Chad Seven

Active member
207 13
Currently long the DAX and Gasoline. I got stopped out on a false breakout on DAX yesterday so this is second attempt. It did occur to me that it may not be a good idea to be initiating a position the day before a bank holiday, there is only one way to find out.

View attachment 279512
I am going to update the rules on the first post shortly.

DAX moved to BE. Stop on Gasoline is already at BE.
 

Chad Seven

Active member
207 13
Faced with an interesting dilemma. The DAX trade is looking strong, however I just noticed that there is a huge gap (see red zone on chart) sitting between my target price and I. The reason I missed it must be that I neglected to check higher TF. My current thinking is:

1. My stop is at BE so unlikely to take a loss
2. The momentum is strong,
3. I am having a decent month so far and it's still early so plenty more opportunities to come
4. It is not the close of the gap which is an obstacle, the open (correct term?) seems to offer less resistance.
5. "Gap open" was penetrated on previous attempt.

I am going to go for it, I may change my mind before next weeks open.

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Chad Seven

Active member
207 13
Faced with an interesting dilemma. The DAX trade is looking strong, however I just noticed that there is a huge gap (see red zone on chart) sitting between my target price and I. The reason I missed it must be that I neglected to check higher TF. My current thinking is:

1. My stop is at BE so unlikely to take a loss
2. The momentum is strong,
3. I am having a decent month so far and it's still early so plenty more opportunities to come
4. It is not the close of the gap which is an obstacle, the open (correct term?) seems to offer less resistance.
5. "Gap open" was penetrated on previous attempt.

I am going to go for it, I may change my mind before next weeks open.

View attachment 279565
View attachment 279566

Difficult result to take to be up of £2K and come away with nothing. When I woke this morning I could see the price was reacting to the gravity of the gap and I had an urge to close which I ignored as I wanted to stick to my plan. I considered tightening stop (not really in my plan) but decided against that as I reasoned that a retracement would need space.

So with hindsight if I am up £2K on a trade and suddenly realise I am in close proximity to a gap and the price is reacting to it the correct course of action may be to take the money.

Edit: 11,000 is also a significant round number so given the confluence of these two factors it was risky to remain in the trade (easily said with hindsight). I am adding an item to my checklist to check for significant round numbers.

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Chad Seven

Active member
207 13
Long Natural Gas

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Chad Seven

Active member
207 13
In light of today's trading some reflection is in order. The last three trades I have taken I accurately predicted the direction of a decent move only for the profits on all three to evaporate. The three trades reached the below profit prior to reversing:

DAX: £2,200 (2:1)
Bitcoin: £1,500 (1.5:1)
Natural Gas: £1,600 (1.5:1)

That's around £5,000 I let slip away. All three of them reversed at points where I could have predicted they would stall (gaps, resistance, round numbers), and in the case of DAX and NG they price stalled for a while given me time to ponder whether I should close the trade or take some other actions. My previous concern regarding closing trades too early now results in my letting trade after trade close for BE. So what I am to do?

Firstly, is my approach of moving stop to BE a good one? I think so, if only for psychological reasons. Secondly, what are my options regarding trade management where there is resistance between entry and target?
  1. Don't take the trade
  2. Take the trade setting standard target distance of triangle height and set and forget (i.e. stop or target hit, current approach)
  3. Take the trade only if there is sufficient space between entry and problem area to maneuver then:
    1. Observe price behavior close to problem area and if reacting to area close position
    2. Set target just before problem area
I don't like #1 as this will mean few to no trades. #2 strikes me as too simplistic, if it was as easy as set and forget we would all be millionaires. The skill is trading is in managing the trade and money management, well I suspect so anyway. #3.1 makes me feel uncomfortable. How do you know if the price is stalling in preparation for breaching the resistance zone or about to reverse completely? Also this would require I am always present which I cannot be (well maybe I can be available 75% of the time).

#3.2. is also set and forget really, but a bit smarter. My concern is that this will result in a lot of low R:R trades around the 1.5:1 mark. Do I need to set a minimum RR requirement of say 2:1? My win rate is just over 50%. I am not sure this would have made winners of the Bitcoin trade and perhaps not the DAX trade. Would I be happy to take a modest profit on NG out of those? Of course.

Leaning towards #3.2. Or perhaps I shall carry on with what I am doing, for now.

EDIT:
Something I have not mentioned, as I am adverse to it, it partial closure of positions but it is worth consideration. I have been thinking about how I can use options to manage risk, however these are only available to me on a subset of the markets I trade.
 
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Chad Seven

Active member
207 13
Closed Gasoline. Had been stalling for two days and that positon closing for BE would be a confidence blow. I didn't think it was possible to be this disappointed by making £1,600.

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Chad Seven

Active member
207 13
Look where this cheeky Bitcoin trade reversed! they know where I draw my lines, they are watching me.

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