The Breaker Strategy - Trading Recent S/R

I want to deal with this thread as logically as possible so that it can be clear to new traders wherever throughout. I am not prepared to take any bullshit from anybody. If at anytime I feel that the negative, noise and cuss cuss is taking over this thread, I will be tempted to happily withdraw into my eden and trade for myself() - which is something I am currently excelled at doing.

Who am I does not matter? Does that matter, lol! What I do in the markets to make money? That is a valid question, and it is the main reason for this thread. Am not here to sell anything, just to share my not so perfectly infallible experience and strategy trading. This is more like a tale of where am at in the trading game! Am comfortably successful - but not heavenly so!

Trading is bullshit! You must understand! If you are not prepared to take bullshit - trading is not for you. The markets can be time consuming, it takes your money just as quickly as you put it in your account(if you allow that to happen). And it tells you fuck off. It owes you nothing, its tells you nothing(well in some sense it does), it does not love or hate, it promises to go neither up or down. So my friends, if the market was a girl, you would do better not to invest any and I mean any emotion in it or torment yourself psychologically by it. Ok!

The markets respond to one and one thing only - Probability; and probability here means this - high chances of multiple occurrences. Therefore having a high probability METHOD and STICKING with it is half of being successful as a trader. And you must understand that even your method does not identify the trades that will be profitable. It only tell you that by sticking with me, there is a high chance that several of my occurrences will be profitable. This simplified: A high probability method does not tell which trades will be winners, its tells you that by sticking with it over time several of your trades will be winners(more than least). And that my friends is just half of the bit.

The next half is Money Management: This of both bits is most important. I really see money management having two parts. Risk Management and Trade Management. These I will elaborate on later as more meat is added to this thread.

I would like to make steady progress on this thread. Most of the knowledge I will share, I have accumulated from free sources - I have never paid a dime for a instructional course or seminar. When I started trading two years ago, I did not have access to a mentor - and I still do not. I messed up my first account - $250 dollars. Demo traded for one month. Somehow sweating it out live works better for me, but before taking this route - I tried to learn all there was to learn. After blowing up my first $250 dollars account, I researched the internet from then until now for the best knowledge and no bullshit. And all the best knowledge I found led me to discover my trading self. The method you choose to trade must depend on you the person trading it. It must fit with your available capital. It must fit with your schedule and lifestyle. And thrust me on this: no method is perfect. A trader has to get to know his strategy, get to know its strengths and weaknesses. Also in this business, no one can hold your hand forever. A trader must show maturity, common sense and flexibility. A trader must be responsible for all the trades he makes. It is also important that one who pursues trading be very patient.

When it comes to the markets: I trade Forex. I trade only EUR/USD. I do not look at distractions while I trade - news reports, calendars etc. I do not want anything to be messing with my mind and emotions. The chart will move the way it wants to move. I look at what the chart is telling me. All the news I want is in the charts; all the speculations I want is on the charts. I stick to one Timeframe for trading - 1hr. I do not look below. I take a peep at the 4hr for a general sense of where the market is - but that is that. I do not use indicators nor moving averages. Nothing but my trend line tool in MT4.

What I do trade in some sense may be price action, I do not know, I do not care - This works for me, and I hope It may work for you too.

Looking forward to what you have to share.

How do I approach my charts? Well! This is how - figure below. My trading involves looking at the market. This is primarily a start chat; a feel chart. It tells you where the market is more generally and more so than when you zoom in to view it. It show where the major trends were and where a major trend is. Its show you where we are at up to now. This I believe is a good way to look at charts for a general feel - if you know what I mean!

You've written so many words, after reading that I still don't know what the exactly you want to express.

I really don't know waht your mean. Maybe the next charts you will let us know about?

I'm also looking forward to seeing what you have to say. Other guys.. he hasn't finished sharing yet, at least wait until he's done to say "I don't get it."

Cheers

Cory

So folks after we are done with our general view of the markets. We will want to zoom in to see a bit more on the charts. We will want to see how price reacted all the way on it journey to where it is. How quickly it went there. How much struggle it went through! (I used the trend line to mark my s/r framework. I think the zigzag indicator does pretty much the same thing. But it can do a crappy job sometimes. You may have to train yourself for a while to really get the gist of this s/r framing!)

(Just a note of clarification: what IO mean by Trendline: I am simply talking about the trendline tool in MT4. Sorry If I confused anyone! lol)

When framing, you do so from the most recent low or high to the most recent high or low. However you chose to draw - just make them the most recent. Spike are all over these charts as well. Spike are irrational moves within the market. If those spikes are not prolonged and create significant distortions - you will be able to frame around them. It may be a tad more difficult to chart S/R frames in highly volatile environments so it may be good to just let the market play for a while. Am sure it will soon decide its mind.

Well! Well! First - make sure the S/R closest to the price are adequately marked. The high of the resistance or the low of the support or generally the triggers for my trades when price breaks above or below one of them. If price breaks above the R - it COULD be a signal to buy. If price breaks below the low of recent support - that COULD be a signal to sell. Low and behold people, that does not mean that every break above R or break below S is a buy or sell like that. You want to look for their proximity to higher S/R ; the more defining ones! (Trade could of course be taken off every break, and a trader could be profitable, but that would mean that the trader will have to be extremely versed at money management. And it would make no sense to take a trade where there is clear resistance or support and hardly a break at all but a mere touch) Look generally at the frame set of the charts! The Frame set of the charts will later help you determine take profit targets when we do tackle trade management.

A break below green line would be a trade.
A break below Marve line would be a trade - but as seen with little pippage!
A break above blue line would be a great trade if manage properly!

Consider a scenario where price is going up! When price breaks out of a congestion zone it will go as far as it wants to go before it begins to form its first area of significant resistance (or support level - if alternative scenario is considered)! That very first resistance should be the one noted as being most important at that level. Then you will want to see at what level support will begin to show up and be respected! Within that frame set you will look for other recent S/R to show up. First resistance is normally tested and more often than not respected, and the same goes for support. This will be true most times because of the mentality of most traders - always looking for first levels of S/R to hold. This process may sometime be smooth, and sometimes not - price may break out and above a little. But the essence of things still hold!

NB: Notice how price tries to break substantially below the first evidence of support and it tries to go lower below that second support a first time! This is due to some people believing that the trend may be turning! It happens a lot but not always.

Are these trades beautiful! The stategy clearly told me to take them and also told me how to stay in! In essence, when to get out and when not to!

So what you are saying is only take trades in the direction of the overall trend?

We want to take trade setups that are most viable, those may sometime be against the general trend. The point of this being: we will never be sure were the price will be going - the market "promises to neither go up nor down". We have to react to WHAT WE SEE on the charts. This is important - when I sit to trade I do not interact with anything else but the charts. No news, no calenders!

Bases on the "pace of the trend" - which I generally inference from the general slope and pace of movement of price in trend direction - I normally give credence to signals that go with that trend more often than not. But normally I take a trade off any break out of a congested area (how price moves in congestion as well tells me a lot about what to likely expect) - after am satisfied that price is willing to break out base on its movement in my "recent S/R" barrier! And something to note: I have more often that not a very limited Risk/reward expectation for trades against trend.

I will show how I prepare for a possible trade!

I like taking breakouts from congestion but have done so with no real system to separate the good trades from bad and no consistancy. I like the H1 signals but can be far and few between and boring to watch especially if you only trade one pair. How many trades in a week on average do you take? How many hours a day do you watch charts? Have you tried taking entries on 15M?
Thx for sharing. Am interested. Look forward to more.

I have never traded this strategy below the 1 hr time frame (I have just grown comfortable with 1 hour price movements, and its works for me because I work in the weeks), but this approach should be workable on any time frame one chooses to trade. Price moves the same way wherever! I have an android phone - I own a nexus one, and I have the app logmein ignition installed. With this app am able to log into my home computer and access my MT4, so it is pretty easy for me to monitor my charts wherever without interfering with my day to day responsibilities. I glace at charts more frequently when I just enter the trades (maybe ever hour or so and I have a good reason for this), but as its starts to move significantly in my favour, I find I look at them less frequently. I don’t really have this as a law! I just don't interfere with a trade until I can move my stop to break-even.

I don’t really find that I have t for active entries every week or so. But this strategy on average give sometimes 4 or so good setup per week. This is not concrete though. I really look at the charts - if I do not see a good setup, I don’t trade. But I find that I am in trade more often than not. So when these signals show up, I sometimes add to my position or just consider them as good reason to continue to stay in the trade that am in.

I can see with you been bored! Not every trader is wired the same way. As I said before, every method a trader uses must be owned by him - it must suit his style.

In trade example marked Trade 1 - The clear signal is there to enter trade. Say that trade was taken, I would have stayed in it to the top at first resistance. Then we see where price began to retreat magnificently after that final bar looking like a pin bar. Now based on the amount of pipage gained on the way up, I was not prepared to give back more than 50 percent of it to stay in the trade so I would exit as second down bar which showed the same type of bearish momentum. If its an uptrend - there will be another opportunity to reenter - I always have that mindset.

In trade scenario 2 - which is a typical up trend scenario - price goes up, meets first resistance and turns and makes its first support. This retreat was modest - I would have stayed in that trade for the turn around. Price tested the first area of resistance breached a little, then turn to towards the first area of support. When I saw it began to breach, I exited the trade. If the uptrend is to continue - there will be an opportunity to enter a trade again! (I was away from charts in this trade however and did not get to exit it according to my methodology, it work out good for me thus - but based on my discipline the above described way was how the trade should have been managed.)

In trade example two: You took the trade, the trade goes good, you are happy - then price faces its first resistance - What do you do? I say remain in the trade and look how far against you the retreat will likely be! If it promises to be too much of a trunk out of your profits, exit the trade. If its not, then look for price to turn to test first resistance made. When price turns there should be no worry or hast to exit because its going again in your favor - and it has given you a place to exit you trade!

I need to know if am doing a good job of explaining what I do? Speak up folks!

Hi Greg..

you do a good job..
Thank you for sharing.

A Trades example you posted is a good breakout trade.
Do you open a trade after a close of breakout bar? or you put a buy stop a few pip above or below a recent s/r ?
how you deal with false breakout?

on more do you trade a pullback to broken s/r maybe like in this attached chart?


thank you.

Anyone took this trade like I am in currently! I am riding this to where its going! Yeah baby!