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Need some help with trading breakouts

  • #1
  • First Post: Oct 6, 2018 10:18am Oct 6, 2018 10:18am
Hello,

If you are price action trader, how would you trade the breakout attached.

The red line is a key area of resistance that was broken. Price has been trending upwards.

My thoughts are to take the long after price is rejected on the breakout resistance (now support). There are several candles there that rejected, which shows lack of selling pressure. Also when price returns to breakout level, a bullish engulf pattern occurs which signals price may be reversing back with the trend as buyers are buying this area.

All in all, I would go long in this area. Just trying to make sure I am reading the charts right.

I appreciate any comments or suggestions
Attached Image
  • #2
  • Oct 7, 2018 12:15pm Oct 7, 2018 12:15pm
Quoting goodoboy
Just trying to make sure I am reading the charts right. {image}
There's no right or wrong in reading charts. There are so many different ways to trade breakouts, the only "right" way is your way as long as it is you sticking to your plan and maintaining consistency over a large number of trades.

e.g. I trade breakouts on the break, so in this example I would only go long on a break up of the new high, but only after a period of consolidation that met certain criteria.

There's nothing wrong with your idea, sometimes it will work, sometimes it won't. As long as you'll win more if it works than you'll lose if it doesn't, it's right.

Hope that helps
  • #3
  • Oct 7, 2018 6:10pm Oct 7, 2018 6:10pm
Quote
There's no right or wrong in reading charts. There are so many different ways to trade breakouts, the only "right" way is your way as long as it is you sticking to your plan and maintaining consistency over a large number of trades.

There's nothing wrong with your idea, sometimes it will work, sometimes it won't. As long as you'll win more if it works than you'll lose if it doesn't, it's right.


Thank you so much TeenyTrader for responding. I like your response and it make logical sense. You answered correctly, I just have to let my win-to-loss ratio and profitability stats answer the question for me.

I agree with you, there is no right or wrong way to reading charts.
  • #4
  • Oct 7, 2018 6:27pm Oct 7, 2018 6:27pm
Trading breakouts is tough as most often you'll be buying high and selling low which IMHO is a long term losing strategy. I don't buy or sell breakouts but rather view them as a sign that price is about to do something interesting. So I prefer to wait and see what price does with the breakout.
  • #5
  • Oct 7, 2018 6:36pm Oct 7, 2018 6:36pm
Depends on the breakout level. If this is previous resistance level, it is likely to drop after it clears all the stops above it. that is just head fake and you end up with a fake breakout. If you wait for breakout, then retrace back out the breakout level, then a continuation of the breakout in the same direction above where it prevously went up , that "might" confirm that it is an real breakout, not a fake one
  • #6
  • Oct 7, 2018 6:40pm Oct 7, 2018 6:40pm
Quoting Winston Reed
Trading breakouts is tough as most often you'll be buying high and selling low which IMHO is a long term losing strategy. I don't buy or sell breakouts but rather view them as a sign that price is about to do something interesting. So I prefer to wait and see what price does with the breakout.
Here's an example of a breakout. If you sell it then see what might happen next.
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A good example of what happens more often than not. A breakout is often an attempt to get rookie traders on the wrong side or sometimes just to take out stops at a support or resistance level. In this case price went to the next level then turned. Something to think about.
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  • #7
  • Oct 7, 2018 6:51pm Oct 7, 2018 6:51pm
If I traded breakouts this might be the way I would do it. Wait for the retest of the breakout area. However even this scenario is often reversed but IMHO it's better than entering on the breakout bar.

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  • #8
  • Oct 7, 2018 6:52pm Oct 7, 2018 6:52pm
It's not difficult to see these breakouts in history. One could in theory go back and study multiple breakouts and develop a strategy. Good luck!
  • #9
  • Oct 7, 2018 8:19pm Oct 7, 2018 8:19pm
Quoting Winston Reed
So I prefer to wait and see what price does with the breakout.
Thanks Winston Reed,

I like your quoted response. A very bad habit I was doing on breakout is 1: Just buy the break out on next candle or 2. Set limit buy/sell limit order near breakout level just HOPE price continues in favor. But there is no hope in trading. I have to be able to read and react.

I am getting in the habit of waiting and making logical decision based on what the chart is telling me. It takes alot of focus
  • #10
  • Oct 7, 2018 10:12pm Oct 7, 2018 10:12pm
Quoting Zakattack
If you wait for breakout, then retrace back out the breakout level, then a continuation of the breakout in the same direction above where it prevously went up , that "might" confirm that it is an real breakout, not a fake one
Thank you Zakattack for the response,

I agree with this as it is more logical and sort of like a reversal trade at break out level.
  • #11
  • Oct 7, 2018 10:15pm Oct 7, 2018 10:15pm
Quoting Winston Reed
A breakout is often an attempt to get rookie traders on the wrong side or sometimes just to take out stops at a support or resistance level. In this case price went to the next level then turned. Something to think about.
Thanks Winston Reed,

What do you mean by " take out stops . " What is the purpose of taking out stops?
  • #12
  • Oct 7, 2018 10:16pm Oct 7, 2018 10:16pm
I always use higher TF to make sure i'm facing the real breakout trend, not a fake.
  • #13
  • Oct 7, 2018 10:17pm Oct 7, 2018 10:17pm
Quoting Winston Reed
If I traded breakouts this might be the way I would do it. Wait for the retest of the breakout area. However even this scenario is often reversed but IMHO it's better than entering on the breakout bar. {image}
Thank you Winston Reed for the example. Had I taken that short, I would lose the money. Better to wait and observe price action.
  • #14
  • Oct 7, 2018 10:21pm Oct 7, 2018 10:21pm
Quoting amri.rudi
I always use higher TF to make sure i'm facing the real breakout trend, not a fake.
Thank you amri.rudi for the response.

I am only using the 3 minute time frame to trade and I have been heavily considering moving up to higher time frame like the 15 min or even daily to observe and read the chart better.

What time frame are you using?
  • #15
  • Oct 8, 2018 7:13am Oct 8, 2018 7:13am
Quoting goodoboy
{quote} Thanks Winston Reed, What do you mean by " take out stops . " What is the purpose of taking out stops?
When trading it is prudent to know your profit target and your stop loss. A stop loss is really just another order. As price moves it is in discovery. It is not difficult to know where traders place stops. For example in a break out trade many such traders will place their stop loss fairly close to a support or resistance level where the breakout occurred. This is why price often comes back and takes out such stop losses.
  • #16
  • Oct 8, 2018 7:17am Oct 8, 2018 7:17am
Quoting goodoboy
{quote} Thank you amri.rudi for the response. I am only using the 3 minute time frame to trade and I have been heavily considering moving up to higher time frame like the 15 min or even daily to observe and read the chart better. What time frame are you using?
I do not believe multi time frame analysis is the panacea many make it to be. It is a dogmatic practice preached by many. Another one I like is trading with trend. Price action is the same no matter what time frame you use. So I believe one should choose a time frame and trade the price action on that time frame. When you look at a higher time frame the PA will be different.
  • #17
  • Oct 8, 2018 7:20am Oct 8, 2018 7:20am
Quoting goodoboy
Hello, If you are price action trader, how would you trade the breakout attached. The red line is a key area of resistance that was broken. Price has been trending upwards. My thoughts are to take the long after price is rejected on the breakout resistance (now support). There are several candles there that rejected, which shows lack of selling pressure. Also when price returns to breakout level, a bullish engulf pattern occurs which signals price may be reversing back with the trend as buyers are buying this area. All in all, I would go long in...
The most important thing to SAFE see breakout. M30, H1, H4 show the edge of the S/R.
that is how you play safe. other than that? Pivot might help.
Profit growth tells you the trader ability.
  • #18
  • Oct 8, 2018 7:34am Oct 8, 2018 7:34am
Quoting goodoboy
Hello, If you are price action trader, how would you trade the breakout attached. The red line is a key area of resistance that was broken. Price has been trending upwards. My thoughts are to take the long after price is rejected on the breakout resistance (now support). There are several candles there that rejected, which shows lack of selling pressure. Also when price returns to breakout level, a bullish engulf pattern occurs which signals price may be reversing back with the trend as buyers are buying this area. All in all, I would go long in...
Hi Bro

Base on this static chart, personally i will not enter as it may be the beginning of a short consolidation zone, where it may continue to bull or wait for retrace to retest minor support and get in at a better price level. If one has to enter long around here it had to be on a smaller trade size compare to a lower price entry level.

If this is not a static chart, I will observe the momentum of the price building inside this consolidation range and decide my directions and entries.

Good Luck.
The only winner is the one who survive the longest...
  • #19
  • Oct 8, 2018 12:30pm Oct 8, 2018 12:30pm
Quoting Winston Reed
{quote} I do not believe multi time frame analysis is the panacea many make it to be. It is a dogmatic practice preached by many. Another one I like is trading with trend. Price action is the same no matter what time frame you use. So I believe one should choose a time frame and trade the price action on that time frame. When you look at a higher time frame the PA will be different.
Thanks Winston Reed,

I am somewhat in agreement with you. In your opinion, mastering reading the price action regardless of timeframe should show where the buyers and sellers are planning to enter the market, and from that we should be able to make high probability trades? This is my idea and thoughts.
  • #20
  • Oct 8, 2018 6:24pm Oct 8, 2018 6:24pm
Quoting goodoboy
Hello, If you are price action trader, how would you trade the breakout attached.
How would I trade it? I would not trade it, I don't have enough information, not that desperate to trade...

Breakout for me, I watch the Weekly highs and lows, and day trade from there, be on the right side of 50 EMA, good to go!

JPY pairs are setting up great right now with JPY being strong, there is a theme on all pairs

Unusual for a good move on a Monday and a holiday at that, let's wish for continuation the rest of the week

We all know what happened to stocks during Octobers past, stay alert



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