Breakout Confirmation? ideas

Hi All

Im looking for reliable methods of confirming a breakout. Be it a pattern break or a reversal off support/resistance.
The methods i have researched so far are only reliable in certain market conditions and useless when we have high volatility.

Please post ideas here!

And the methods MUST support the idea of having a "reasonable" stop inplace.

ThankYou to ALL

AnyOne??????

Hmm.. First of all make sure that the chart indeed indicates that something got broken and the market should clearly see it, at least in theory. Then wait for a solid confirmation (at least 10-20 pips break + hourly close, depending on the tf you're trading on..). Then put sl at middle of range or closer and first tp at half the range size or greater and try not to touch it until either is triggered, would be my guess. Can't say much more without more specifics about the situ. Just use 1:1 r:r or better and try to be patient and get a reasonable confirmation even if sometimes that means you might miss the trade - because it improves your chances considrably abviously (something I'm still guilty of on occasion - being impatient). Then just let probability do it's own over a series of such trades I guess.

Good luck.

I think this would help:

http://www.forexfactory.com/showthre...hlight=rainbow

Mosr rainbow systems are good for that.

1. Define the direction of the trend (UP)
2. Buy at support
3. Kick back and not worry about the breakout

OR

1. Screw the direction of the trend (UP)
2. Buy at R
3. Bite of all your finger nails in anxiety

If u know in which direction the trend is moving then buy at the pivot instead of at the top, this way you won't have to worry about the breakout now working out, yet if it does you'll profit from it.

Today you could have bought at 214.36 and right now you'd be panicking.

OR

You could have bought at 231.33 and couldn't care less right now about what the breakout is gonna do.

Example CHART:
http://img292.imageshack.us/img292/4681/gybrgq5.gif

effi, I like your postings, but on this chart I can't see any up trend nor down trend. The last local low was broken so a long entry down there would had been risky - even if it worked.

Regards - Xaron

The example chart was independent of the (UP) in the first text

And no, its not a matter of, luck, because the 214.35 sell is gonna work out too EVEN though the last local High was broken.

Mark my words

It's an assumption based on statistical probability not luck.

Ok, but that's more an example for range trading, at least with this chart.

It doesnt have to be range trading, this is simple supply and demand, the market will continue to repeat itself until there is a change.

Where there is a change ull be wrong, but that's ok, because that only confirms the new direction of the trend, and then it starts all over again in the new direction. : )

But within the stability of the pattern u have many profitable trades.

A lot of winning trades, few loosers : )

Ah thank, yes you're right.

The key is: Where are "good" support and resistances to enter there? If there is an up trend, where do I enter in a pullback?

And another thing: Effi, I wonder about your "breakout" thread then. You don't seem to like breakouts? (I don't like them either, because of so many false ones). I like to enter in pullbacks but it's hard for me to decide when the trend resumes...

First of all you must look at the big picture, because you don't wanna be buying into a close resistance or selling into a close support and try to keep with the trend. So look at the H4 chart here first. See how price has been between the two solid yellow lines (11584-11541) all through the night basically, so we have a well defined range. Next resistance is probably the swing high at 11682 with a minor resistance at 11625. Next support is around 11450. So if we want a trade with a good risk:reward ratio we have to look at these potential places where price might stop and reverse. And the trend is up.

Now look at the M5 chart. You can see through the night and morning we had a couple of fake breakouts to the downside. How do I know that they are fake? They weren't confirmed. A break is confirmed when it penetrates the s/r retest it and then continues along the break. We get an entry when the penetration is penetrated again after the retest. None of these did that, since price never went below the lowest price that the penetration gave after the restest. This is great since we have a way of avoiding these false breakouts.
Now instead we have a break to the upside, which is what we want since we want to keep with the trend. Price broke through and made a high above the resistance. Then it restested the low and is now moving back up. Our entry will be above the highest high + 1->5 pips depending on how volatility of what you are trading), which I've marked as the green line on M5. The red line is the stoploss and this goes 1->5 pips below the lowest low of the retest. I look for breakout and restests on M1->M15 charts. And I will close out either 2/3 of the position at 2:1 (risk:reward ratio) or 1/2 of the position at 1:1 and this depends on the speed of the break (how fast it's moving) and how far away the next s/r is. This will give me at worst a BE trade and I'll manage the remaining position depending on the priceaction given.

I'm not taking this trade because of the upcoming US news, I don't trade to close to the news unless I'm already in a trade and I have reached BE already. And I wouldn't take this anyway because I wouldn't enter a trade into a round number. I would want a better entry.

I'm in a trade from this morning in oil (QM) on the other hand. The trade was countertrend so I risked half the position size I normally risk. The range is between 127.350 and between 126.500 and these are s/r area as can be seen on the H1 chart. Next support was 125.850 so I needed a BE before that if taking the trade down. And as you can see price shot up at that level, but is now continuing down.
The entry is shown on the M5 with the green entry-price line, the red line is the stoploss and the BE is at 2:1 with the lightblue line where I closed 2/3 of the position. The stoploss is conveniently above the resistance line and now I'm hoping for some good news in favour of my trade.

All this can be played on the currency pairs as well and I do this all the times. But you have to get used to picking theses ranges and I think the overnight ranges are the easiest to play with this method. The longer the range is holding, and the more the boundaries of the range is tested the bigger chance of a good breakout. Just make sure you are aware of the trend and other s/r.

I don't mind breakouts.

What i "mind" is the approach some traders take to actually exploit a breakout.

: )

Hi

Thanks so much for all your input, i was expecting maybe 1 person to be interested and offer advice. Definately not expecting so much interest.

EFFILANG: Im a bit confused with the method you mentioned, am i correct that you locate probable support "within" a range/formation (in an uptrend) and then have an order waiting bang on the support area ready to fill you long if there is a pullback?
Thanks for your help

NOWANDLATER: My current method of trading a breakout is exactly the same as you have described. It does work, however i have found a few holes in it when it comes to high volatility resulting in no retest. Also i have found that a retest that takes a while to occur can lead to a failed move. I have many many rules for myself when using this method that keep me reasonably safe from failed brks. But i have had enough of watching excellent setups fly by when this method fails.
Thanks for your help

THE NEWS... typically, a major news event all but guarantees a break-out...

The true challenge is not knowing when a break-out will probably occur, but the direction of the break-out once it occurs. I believe s&r techniques are best...

Walt

It there's one breakout scenario that should be trusted the least, I feel it's when the break is news related..

Often the fast moves can get caught on the M1 charts but you have to be really quick. And so what if you don't get a retest, that means you've missed a trade - big deal?! There's plenty of these scenarios from the overnight ranges everyday.
A retest that takes a while to occur isn't tradable for you then, and just leave that one as well... Take only the ones that falls under your rules, trade less and your win rate might be higher meaning that your still a winner.

Although there may be whipsaws on a MAJOR new release (i.e. FOMC, a central bank adjusting overnight rates, etc.), it's clear that breakouts occur during the news. Look at the eurusd... at 8:30 (non farm payroll & unemployemnt rate) the currency broke to the downside and has since broken to the upside. These were excellent scalping opportunties for 20 - 30 pips on each break-out.

Walt

Hi JONES

The News is something I stay away from personally. Have seen to many setups blown to hell by the news release.
Thanks

NowAndLater: Thanks for the responce, i have never used the M1 to judge a brk-retest. I tend to use the retest time frame that is 4 times smaller than the setup timeframe. ie: 1hour setup 15min retest. 4hr setup 1hr retest. I do this because i doubt the reliability of the retest in smaller timeframes.
Im interested to know how your method differs, could you post a chart example?
Thanks