PULL BACKS or BREAK OUTS?

[Fugazsy]

Which does your personality relates best and why do you think so?

I relate best to BO's because I want to get in a trade that shows momentum.

I am very aware of many false one but if one try to specialise in what he is best inclined he will be able to distinguish.

 

[tomorton]

I take pull-backs - I am cautious and a trend-follower - I only want to get into strong and consistent trends. I look for some confirmation also, e.g. a bullish outside key reversal from a pull-back low to get me back into an uptrend.

I accept break-outs can make spectacular chart moves with very large % gains, and I will miss these but my personality type makes me want to get into something that already has a winng history.

 

[Fugazsy]

I take pull-backs - I am cautious and a trend-follower - I only want to get into strong and consistent trends. I look for some confirmation also, e.g. a bullish outside key reversal from a pull-back low to get me back into an uptrend.

I accept break-outs can make spectacular chart moves with very large % gains, and I will miss these but my personality type makes me want to get into something that already has a winng history.

Thanks for your post.

Make sense to me and it is very crispy and clear. What time frame do you usually use?

 

[barjon]

Which does your personality relates best and why do you think so?

I relate best to BO's because I want to get in a trade that shows momentum.

I am very aware of many false one but if one try to specialise in what he is best inclined he will be able to distinguish.

I take 3+ bar pullbacks, but then I'm looking for momentum and a BO of the swing low bar. So both

 

[Fugazsy]

I take 3+ bar pullbacks, but then I'm looking for momentum and a BO of the swing low bar. So both

Yes. Good one.

You make me think I might do also the same because my BO trades are taken mostly in the direction of the least resistance, (unless is a reversal pattern), in a flag which is a BP I will not risk my money if there is not momentum or BO out of it.

Just posted this chart on the other thread, I did not take those trades (Christmas), but it is part of my job to go back each day and revisit....

EDIT:

Chart
1) wedge reversal
2) wedge continuation
3) Head and Shoulder
4) Bear Flag
5) channel continuation.

2,3 and 4 reached a 10 pip TP with a 5 pip SL only.

1 and 5 did not reached 10 pip TP but if SL was trailed after 5 pips gained they would end at BE.

 

[barjon]

Here's one - the basic set up off daily, the "breakout trade" via M5. The early December deepish pullback and then the smart recovery was great for the pullback trades - came along like London buses.

 

[tomorton]

Thanks for your post.

Make sense to me and it is very crispy and clear. What time frame do you usually use?

I only enter new trades at or soon after the London close. I trail initial stop and advance target as often as I can though not able to screen-watch every session. I generally find I am holding 4-8 days, sometimes up to 14. The losers that hit my initial stop usually get there much faster, usually within 2 days.

I'm trading the major Forex pairs as above but trend from the weekly bar chart is my initial filter. Certainly happy to take positions on a 3+ bar pull back like barjon - Hi again barjon! - but will also take a shorter pull-back if it is ended with a strong candle like a pin bar or outside key reversal etc.

 

[forker]

Both, but I do it very differently to anyone else with bar pullback and breakouts

 

[Wicked_Daddy]

I trade the exit of a pull back.

One of my rules is to only trade with the major trend (higher TF) and with the trend of the TF I'm in. I look for confluence in the 5m and 15m chart and execute the trade in the 1m when it aligns with the 5m. Exit is when the 15m shows weakness but I'll monitor the 5m to make sure there are no surprises.

To me, a pull back is a reason to exit and wait for the pull back to finish, seen when the original direction/trend then continues. Sometimes it doesn't and then a reversal is staged or at least a longer pull back than I was expecting. But that's why I sit them out. You just never know if it's going to turn around and resume the trend or go in the toilet.

I should add that I use Stochastic as insight to the strength or weakness of the pull back. Don't think of the indication as overbought or oversold. There is no such thing. Think in terms of the move losing/gaining strength. The price should be consolidating in unison with the Stochastic entering its high or low zones. I use this as my signal to be ready to enter or prepare for my exit.

As far as BO's: I'll trade a BO but really all I'm doing is waiting for a trend to confirm, then enter. I probably miss the first big moves of a true BO but I'll take a bite out it depending on how long it lasts.

 

[luckyhaa]

Breakout and Pullback workout well in bullish market.If trend reverse then most of the case stop will hit.In my experience pullback is more risk free if you properly interpret volume pattern

 

[tomorton]

I suppose we mostly accept that break-outs can give more dramatic price changes than pullbacks. Thomas Bulkowski in his usual methodical way has attempted to put some statistical data to this to help actually trading such situations - see his research on Overhead Resistance at http://thepatternsite.com/index.html.

He finds that price breakout upwards where there is no overhead resistance commonly sees price rises 2 or more times what happens where there is overhead resistance. Since a pullback in a bull trend must always have overhead resistance, this does help support the point.

 

[tomorton]

PS: I have updated my watch list spreadsheet to show me which currency pairs are in sight of their all-time highs or lows. Good possibility of exceptional gains when break-outs go through these levels.

 

[verial]

I do both. Depending on the type of gap, you can usually tell which will happen. Also, using candlesticks, you can get the probability of guessing the right direction up to above 90%.

 

[stefcio2002]

Wether you want to trade reversal or break out should depend upon the daily range of the pair. The smaller, the safer it is to trade reversal.