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Breakout Strategy - The Pro's Way

  • #1
  • First Post: Oct 21, 2006 2:51pm Oct 21, 2006 2:51pm
Hi Guys,

I thought it be a good idea that I start this thread since I currently trade breakouts of a 15 minute chart and am having some success.

The point is that I understand that alot of people trade breakouts of channels etc but everyone has different entry and exit rules. I want to try to find the difference between the traders who trade breakouts that are unsuccsful vs the traders who are and have been consistently profitable using breakouts.

Basically I have been trading this way for 3 months now but only on a demo account. I want to go live but just want some reassurance that this actually works in the real world. I know Psychology has alot to do with it, but generally speaking is this a profitable way to trade.

Please people share your thoughts on this in a bid to make everyone here profitable consistent traders.
  • #2
  • Oct 21, 2006 5:38pm Oct 21, 2006 5:38pm
Just for starters do you trade the gbp/usd?
  • #3
  • Oct 21, 2006 5:44pm Oct 21, 2006 5:44pm
Yes I do trade the GBP/USD.

Why?
  • #4
  • Oct 21, 2006 5:50pm Oct 21, 2006 5:50pm
Breakouts in forex can be extremely profitable, but that doesn't mean that yours is. Since there is nothing that you told us, it's hard to tell you anything. Can you show us a few hundred backtested trades and their results?
  • #5
  • Oct 21, 2006 5:52pm Oct 21, 2006 5:52pm
I like larger timeframes, 4hr/daily. more "stable" and bigger gains.
  • #6
  • Oct 21, 2006 6:46pm Oct 21, 2006 6:46pm
OK I basically wait for a close above support or resistance lines (Flags,Channels etc) then once the next candle moves a few pips beyond I enter with a profit target of 20 pips and 30 pip stop loss.

Does this sound like the way you guys are doing it?


Scott Do you get many opportunities on the 4 hr? What are your rules? How profitable is it? Average pips per month?
  • #7
  • Oct 21, 2006 6:46pm Oct 21, 2006 6:46pm
I do not follow all the currencies but I do follow the gbp/usd and have done some back testing on how it breaks out. I would be more than glad to share some charts with you on it. I have found with the gbp/usd that it has a tendancy to channel between 20 to 30 pips at the close of the day 5pm eastern and then makes a move between 2am and 3am eastern. Though if it continues to trend up or down and not varing more then 10 to 15 pips between highs and lows it normally stays in that mode until the London session. Meaning on the up side highs & lows keep getting higher but staying with 10 to 15 pips of each other. Of course on the down side the opposite is true. If any body else has imput on this I too would be more than glad to hear it.
  • #8
  • Oct 21, 2006 7:23pm Oct 21, 2006 7:23pm
Just the information already in this thread, although scarce, can lead to many different breakout strategies, in my opinion. Keep in mind there isn't one type of breakout. There are literally dozens of profitable breakout strategies that can be traded on the GBP/USD alone. Take one method (false breakout, session breakout, channel breakout, indicator breakout, etc), examine it, backtest it, then refine it, then backtest it again. There are multiple ways to trade each type of breakout profitably, just stick to one until you've turned it into a successful system. In my opinion, one can live off the profits of one successful breakout strategy traded on one currency.
  • #9
  • Oct 21, 2006 7:33pm Oct 21, 2006 7:33pm
Quoting Micardo
OK I basically wait for a close above support or resistance lines (Flags,Channels etc) then once the next candle moves a few pips beyond I enter with a profit target of 20 pips and 30 pip stop loss...
Do you take profit at least 60% of the time? Because you need to be right at least 60% of the time, not even taking into consideration spread, to breakeven, much less be profitable.

Quoting Micardo
Does this sound like the way you guys are doing it?
Don't take offense to this, but if everyone was doing it, they would either A) not tell you, or B) not be making money doing it. If the odds are in your favor, the answer is A, and in that case you would have to find out for yourself anyways.
  • #10
  • Oct 21, 2006 7:41pm Oct 21, 2006 7:41pm
Being new to all of this I am willing to share with others what I so so they can approve or disprove my thinking. Once I get things figured out (always learning though) then what. Keep it to myself. I really do not see a point in that. It's not like we are competing with each other over a limited product. Everyone on this forum can by the same product and if we buy it at the same time we all get it for the same price. Our little group does not effect the price of the product.
  • #11
  • Oct 21, 2006 7:45pm Oct 21, 2006 7:45pm
Quoting twinchell
Do you take profit at least 60% of the time? Because you need to be right at least 60% of the time, not even taking into consideration spread, to breakeven, much less be profitable.
Don't take offense to this; but where are you getting the 60% from? Mathematically, you have a winning% coupled with payrate and frequency. So you can have a 10% TP if your payrate is 20:1, you're gold. So %TP out of context of payrate, seems to be a false premise..

Quoting twinchell
Don't take offense to this, but if everyone was doing it, they would either A) not tell you, or B) not be making money doing it. If the odds are in your favor, the answer is A, and in that case you would have to find out for yourself anyways.

Don't take offense to this, but I am currently doing what he says, and I share openly. Just nobody bothers reading what I write
google:
  • #12
  • Oct 21, 2006 7:54pm Oct 21, 2006 7:54pm
Quoting twoblink
Don't take offense to this; but where are you getting the 60% from? Mathematically, you have a winning% coupled with payrate and frequency. So you can have a 10% TP if your payrate is 20:1, you're gold. So %TP out of context of payrate, seems to be a false premise..
I don't take offense to anything. All I'm saying is at 20 pip profit and 30 pips stop, you need to win more trades than you lose. If you take profit at 20 pips and lose at 30, it doesn't take a graphical calculator to see you need to win more trades than you lose.

Quoting twoblink
Don't take offense to this, but I am currently doing what he says, and I share openly. Just nobody bothers reading what I write
Personally, I've stopped testing systems posted on forums months ago because I wasted so much time doing just that. I have not read anything regarding your work on systems, so I wouldn't know. I have, however, read your essays, and they are enjoyable.

I don't want to make this thread about you and I, but you have read, as you said, literally hundreds of books. Do you think someone who hasn't read one of those can enter your thread and thrive?
  • #13
  • Oct 21, 2006 7:54pm Oct 21, 2006 7:54pm
Twoblink

Have you found the Holy Grail?
  • #14
  • Oct 21, 2006 8:28pm Oct 21, 2006 8:28pm
Twoblink

When I ask if you have found the Holy Grail I do not say that to be sarcastic. I am just picking your brain to see what strategies you have found to work.
  • #15
  • Oct 21, 2006 8:44pm Oct 21, 2006 8:44pm
Not to be rude, but you should probably ask him in the threads designated for his strategies. This thread is about breakout strategies.
  • #16
  • Oct 21, 2006 8:54pm Oct 21, 2006 8:54pm
Good tip. I appreciate it. I will do that.
  • #17
  • Oct 21, 2006 11:19pm Oct 21, 2006 11:19pm
Quoting Micardo
OK I basically wait for a close above support or resistance lines (Flags,Channels etc) then once the next candle moves a few pips beyond I enter with a profit target of 20 pips and 30 pip stop loss.

Does this sound like the way you guys are doing it?


Scott Do you get many opportunities on the 4 hr? What are your rules? How profitable is it? Average pips per month?
seems to me it’s a good entry plan. If you added an exit plan you could double your profits though (exits are about 3x more important than entries).<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /><o></o>

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on a 15min chart by the time you are down 30 pips you should have already known it was failing. I know it’s hard to break the urge to have a large s/l just-in-case-it-returns, but you are basically betting on a trade that is going the wrong way. When I first started trading I almost convinced myself that the s/l was responsible to ruining my trades. Try putting the stop 2 pips beyond the low/high of the last bar going your way with a max of 30pips. Your win rate might not go up but your pay rate sure will.<o></o>

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On the flip side of that you really need a reason to t/p. 20pips and leave seems the easy way to go but you are limiting your profits. I would suggest the same t/p as the s/l, exit the trade when the price is 2 pips beyond the low/high of the last bar going your way (no max). this will keep the price from getting to 19 and going back down to -30 on ya . Again this will only help your win rate by a tiny bit (1% is a lot though!) but your pay rate will go up substantially.<o></o>
  • #18
  • Oct 22, 2006 12:55am Oct 22, 2006 12:55am

why are everybody busy about holy grail...
i agree with twoblink...there was no holy grail...
or i can say is the phychology,money management and methodology itself are the holy grail...

"Analysis Is Hard But Trade Is Easy"
  • #19
  • Oct 22, 2006 2:06am Oct 22, 2006 2:06am
Quoting Se[V]eN

why are everybody busy about holy grail...


i agree with twoblink...there was no holy grail...
or i can say is the phychology,money management and methodology itself are the holy grail...





you do need to start with a plan that has positive expectancy, at least thats what twoblinks keeps telling me. I hope to prove him wrong with discipline tho
  • #20
  • Oct 22, 2006 3:10am Oct 22, 2006 3:10am

why are everybody busy about holy grail...
i agree with twoblink...there was no holy grail...
or i can say is the phychology,money management and methodology itself are the holy grail...



Nicely put
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