trader_dante
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When Proctor takes out approx $64 to the upside or $59 to the downside. I call that a breakout.
When Proctor takes out approx $64 to the upside or $59 to the downside. I call that a breakout.
DionysusToast
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LMAO TD - that's a cop-out, not a break out !
trader_dante
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LOL, yeah just how I like 'em.
DionysusToast
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What a crazy site...
Investopedia explains Breakout
In practice, a breakout is most commonly used to refer to a situation where the price breaks above a level of resistance and heads higher, rather than breaking below a level of support and heading lower. Once a resistance level is broken, it is regarded as the next level of support when the asset experiences a pullback Most traders use chart patterns and other technical tools such as trendlines to identify possible candidates that are likely to break through a support/resistance level.
I now look forward to the following 100 posts. Where the definition of 'breakout' is argued, discussed and dissected with one group saying it only applies to ranges and another saying it doesn't.
Shurely AAPL wasn't that much of a challenge????
Investopedia explains Breakout
In practice, a breakout is most commonly used to refer to a situation where the price breaks above a level of resistance and heads higher, rather than breaking below a level of support and heading lower. Once a resistance level is broken, it is regarded as the next level of support when the asset experiences a pullback Most traders use chart patterns and other technical tools such as trendlines to identify possible candidates that are likely to break through a support/resistance level.
I now look forward to the following 100 posts. Where the definition of 'breakout' is argued, discussed and dissected with one group saying it only applies to ranges and another saying it doesn't.
Shurely AAPL wasn't that much of a challenge????
trader_dante
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I'm not going to start spouting off about how I would trade Apple because I don't buy breakouts to new swing highs. That's why I asked the question as to what you considered a breakout in the first place.
A range break is a type of breakout and its much easier to trade in my opinion. There are some general rules to buying or selling a clearly defined breakout (the one I posted was a bit of an extreme example but it will work the same) that should help you achieve a higher than 60% return.
I'll keep this relatively short as it's Friday evening.
Best way is to get in before the break.This takes quite a bit of experience. You're going to, obviously, need to know that it's going to go. No punting. Sometimes you will know this when it's in the middle of the range. Usually you won't know until it's at the range extreme. As far as charts are concerned, most useful thing to watch for is price hugging one side of a clearly defined range. See chart 1. You can tell that's about to go from the way it's sitting there. They won't always be that obvious. As a general pointer, look for higher lows into resistance or lower highs into support. Equally, a channel or bull flag beneath a resistance level or a channel or bear flag above a support level are very reliable.
If you are conservative you will want to wait for the break and then assess the situation but sometimes if price has got really pent up, you might miss it. So it depends whether you are the kind of trader that cannot live without being on the initial move.
I usually like waiting until after it's broken. If you wait till after it tries to breakout you get some really handy info. E.g. if it's a genuine or false break. Be rational. 10 ticks through the level is not a breakout unless you are trading Short Sterling ;-).
Chart 2 is the Bund. There was a nice false break on the D1 at the point marked by the arrow. Once you see that and you have the experience to know it's going to nosedive then your job is then to try and nail the first retracement. If it personally helps you I guess you can check the DOM or L2. Just make sure you don't end up taking 2 ticks out of it like the rest of those guys
Anyway, you don't need to look at the market depth to know that's going south. As soon as I saw that day close I started selling pretty quick. I cracked that short at 3 places while it was in that range and took about a point out of it when it broke. But if you are a conservative trader, you still get a chance to hammer it after you see the day close at chart 3 (yellow arrow) and the retest of that lower s/r pivot onthe H1 at chart 4. Incidentally, that retest took place on news. If you have hit it right, you will be on the right side of news releases almost all the time.If it's a genuine breakout, you want to wait for the retest. Yes it's as old as the hills but still works wonders. If you wait for this, you up your odds massively. Crack it the first time back. Make sure that there has been some time and space beween the breakout point and the point at which is returns to it. I personally prefer to see what I call a rounded approach by price on the H1 or D1 timeframe to fulfil this criteria. See chart 5 (yellow arrow). As long as you have your levels good, you usually won't get more than a few ticks drawdown max. I actually missed that first one (yellow arrow) but traded off the pivot yesterday at the red arrow with a 2 tick drawdown. I only managed to get 9 ticks out of it making it a bit of a failed trade but you see the point.
Good luck dude.
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Liquid validity
How to avoid false breakouts - wait until breakout is confirmed, not just a possibility, you lost upside yes, wait for the pullback, enter when pullback holds and goes past the high of the initial breakout.
Won't work all the time but nothing does.
Won't work all the time but nothing does.
trader_dante
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Dangerous.
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Liquid validity
Yeah for a new intraday high or daily chart high yes, I should have mentioned that my bad.
I agree with this in part, however you should only do this on occasions if you know your system and your method extremely well. Get used to buying high, selling low and losing a fair amount, that's just the nature of the beast if you're a breakout trader.
wackypete2
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You could be in a lot of pain if the price ranges for a while and you keep getting stopped out. If you get in BEFORE the event you are only hoping that the even will happen. Success will never come by using hard fast rules. The only way you will win is to get experience trading. If what you are doing isn't working, even if just temporarily, then do it a different way. DT, if you trade breakouts that way and it works for you it's most likely because you have traded breakouts enough to determine how YOU will trade it vs. how others may try it.
Peter
ADDED: I think trading false breakouts and head fakes is actually easier. It works for me but then again I've done it enough times to figure out how to get this to work for ME. Also, getting to know really well the market you trade is invaluable.
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That's a good way (safe way). Sometimes you may miss some good moves, but you won't get caught in false breakouts. I would go to a smaller time frame and on the first sign of bouncing off the level would enter the trade (lowering the risk - entering closer to the break out level)
wackypete2
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If the pullback holds don't wait for the high to be broken, enter at the pullback level and use the high as your 1st target. Everyone else will be buying there, you should be happy to sell to them.
Peter
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I trade "breakouts" on short TFs, normally around news times. Very simple really, the trigger is usually an engulfing bar that takes out the whole range or perhaps the most recent part of the range. This works extremely well on index futures, although I don't take them at any old spot, the range must be formed at a significant area.
If I was going to try breakouts on say forex on higher TFs, I would wait for a pull back to the breakout area (again this would have to be significant in some way) and enter if there was confirming PA.
I think breakouts generally are tricky (other than in my first example, where they are very, very simple and very profitable).
The key as always is to be extremely selective.
If I was going to try breakouts on say forex on higher TFs, I would wait for a pull back to the breakout area (again this would have to be significant in some way) and enter if there was confirming PA.
I think breakouts generally are tricky (other than in my first example, where they are very, very simple and very profitable).
The key as always is to be extremely selective.
Would agree with that. And step 2 is the key here. Rather than just buying by guessing whether the retracement is going to end there must be evidence that it is happening. I Iook for a number of things to give me a signal when to enter on a retracement (based on trading stocks).
- The pullback must be orderly and volume must be diminishing,
- Prices must be approaching a place in relation to an MA where historically they have rallied,
- Bar ranges narrowing,
- Look for a washout of lows, triggering stops, with prices then recovering on strong volume showing institutional support,
- Get out of the trade very soon if there is no follow through,
Following those rules does rule out a lot of trades for me but the ones that I do take usually have a good chance of making money.
I would have a hard time trading break outs as I would be buying at at point when I would currently be selling.
DionysusToast
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There's another way to trade a retracement, although it's not something I do personally but I have seen people do it.
Let's say
- market moves from 1150 to 1140.
- It then moves from 1140 to 1144
- you think this is just a retracement & the downmove will continue
- place a stop (or stop limit) sell order 1 point (or whatever you comfort level) below current price
- trail that stop entry
So if you trail 1 point and market hits 1145, you'll have your stop entry to go short at 1144 if it turns back down.
You won't get in a few ticks off the top of the retracement but you will be able to get in at a better point than a breakout, especially if you refine the size of the trailing stop entry over time.
Let's say
- market moves from 1150 to 1140.
- It then moves from 1140 to 1144
- you think this is just a retracement & the downmove will continue
- place a stop (or stop limit) sell order 1 point (or whatever you comfort level) below current price
- trail that stop entry
So if you trail 1 point and market hits 1145, you'll have your stop entry to go short at 1144 if it turns back down.
You won't get in a few ticks off the top of the retracement but you will be able to get in at a better point than a breakout, especially if you refine the size of the trailing stop entry over time.
foroom lluzers
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Are you going to give the holy grail ,of finding trend breakouts , without the false breakouts ?
I have seen at least 15 false trend breakouts in a row!
Are you going to give the holy grail ,of finding trend breakouts , without the false breakouts ?
I have seen at least 15 false trend breakouts in a row!
No, as I said in 2010, there is no method that eliminates a significant proportion of false break-outs.
We've been over this. What's the point of exhuming an old thread from 2010 to beat the same drum?
