The Breaker Strategy - Trading Recent S/R

I think it serves your interest most having your lines drawn precisely. It reduces the possibility of errors of entry when you do decide to enter a trade (off breaks 3-5 pips) in the market. MT4 auto locks the ends of the lines whenever their ends come pretty close to each other.

I am laughing at my self writing the above lines, basically making a point out of what could otherwise be triviality. But I really think that having those lines place together properly helps one to enter trades better because they kind of direct the eyes and help with precision.

Check with post #10 about first break of s/r. I will also try to add more details in a following post.

The following two charts illustrate what makes me apprehensive about taking trades at a first attempt by price to break either above the first occurrence of R or the first occurrence of S after a substantially move in price up or down. This is not to say I do not take trades at a first break sometimes. I normally look for evidence in price action that would encourage such a move, when I choose to do so. But I find that price respects first S/R all too often after long moves.

I have also said before that it is entirely possible to trade all breaks of S/R signals and still be profitable. Doing this though, a trader must practice extremely good Money management. It may be obvious to some traders by now that this method is very discretionary -; only try to trade as many of the S/R signals possible and practice good money management. Probability makes this method extremely successful when as many possible signals are taken.

Thanks! This helped a lot, also I reread the whole thread so far. Tons of great info now that I know what you meant. I'm not sure why more people aren't responding, this stuff is really helpful!

When you have a chance could you go into more detail about how you set your stop losses? I know you mentioned in one case you would have put it 50% into the bar that advanced into the R area, but you've also mentioned using the whole S & R distance as well.

Thanks again, looking forward to more great info. Also, I'll try to post trades as I have them so you can critique them, and offer ways to improve.

Cory

It is great knowing that you are finding the material helpful. At one point I was really wondering whether or not I was presenting my approach in a clear and understandable fashion. This style of trading is boring, extremely so sometimes, but it is very profitable. This is real deal probability trading in my definition. Nothing beats it. It has helped me to develop very quickly in this trading game.

I want to complete presenting the strategy. I hope to do so very soon. Stay tuned!

Feel free to post your trades. After am finished discussing my approach, ultimately I want this thread to develop into a place for a discussing trades taken using the recent S/R method, leading to a more fuller understood of the strategy for all who are committed to using it.

Peace,

Greg

Anyone took the prior two trades, and currently in this one!

Yes, took that one, also in a really nice one on G/U! I did some research and it seems to work well on that pair too, but maybe slightly less predictable than G/U. Anyway, about 80 pips up on that one, and banked half at a previous resistance.

Thanks for keeping it updated, and I'll probably be back with more questions when you explain the stop loss stuff.

Cheers, and many thanks.

Cory

yes, please do continue. I'm finding this a very good fit for me. I'm trying to analyze why that is.

A few questions about what types of patterns you look for. Is it safe to assume there are certain ones and this is largely what you base your setups on?

I'm trying to remove as much subjectivity as I practice. If you could confirm or correct me here, that would be great!

1. Never against strong SR
2. After long ranging price patterns
3. After trendline retrace/corrections (w trend) Tho it seems you might skip the first occurance of this.
4. After a large impulse and stall (not sure what else to call it) Guessing from charts.
5. After the fail of a trendline and break of prev SR?
6. After an obvious 123/HigherHigh or Lower Low pattern?

Are my entries in the right spot? I'm least sure about a trendline fail. Is it there or do you wait for it to test the trendline again and take the entry off of THAT support on the other side of the TL?

Thanks for any advice you might have.
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I react to a setup pattern (of recent s/r), a moment in the market to trade and not so much a set of predefined setups.

Having predefined setups I believe give rise to traders having expectations of the market - something that I do not try to have. But with that said, the trading experience is such that two traders may have two different methodology, or interpretation of the same thing which can achieve the same result and sometimes different. I think s/r trading can be such.

If you have not read this thread word for word from the beginning, I would recommend that you do so. Drop your impulse to analyse when you do so. lol.

My trading is s/r trading but it is not the typical way s/r is normally traded. It is a simple divergence from it. I may even call it ‘price action s/r trading’ (if I may have the liberty of playing with words here) because what those waves on my charts do is basically follow price wherever it goes to the dept of the most recent s/r. I really have not gone further with any analysis, except a few caution at some levels. Which may read: a) be cautious at higher S/R levels, when price is ranging without a discernible trend b) after notable higher highs or lows, be cautious of taking trades at first test of whichever was first: S or R. c) be cautious at a major trend line.

The primary thing to take away from this strategy is that you react within 3-5 pips outside demarcated recent s/r levels. I do not think I would want to analyse the markets to the level where I want to assign for myself patters in it. That goes against one premise of mine: a belief that the market promises to neither go up nor down. And I certainly don’t wanna weigh down myself with expectations that it will from a point entered.

Why recent s/r?

I trade the S/R’s as a way to control my state of entry. There is no ideal place to enter the market, but as a trader, you can define how you want to enter. Recent S/R’s give a synopsis of the general mental state of the trading arena in my opinion. Some force causes price to stop at recent R. Some force causes price to stop at recent S. If price breaks a level, some catalyst causes that to happen. And certainly, price does not stay imprisoned between recent S and R forever.

When price stalls at a level - for me it just stalls. If price breaks a level - for me it just breaks. I may not even want to know what caused it. So with my recent s/r I think and have also proven with examination that it gives the best opportunity to ride the effects of a catalyst in a direction. Wherever the market goes, that is where it goes! Wherever it goes, I want to follow!

This is the primary reason why when I sit to trade I do not interact with news or the calenders, or anything external for that matter. Imagine you were watching the calender and good news came out for a particular currency. You would “expect” the currency to increase in value. So you would want to buy. But the sad truth is that sometime how the market reacts to good or bad news can be a mystery. This mystery to you happens while you sit there under the influence of news, calender, or whatever THINKING - WTF, why, etc - something you should not do when you trade.

The only thing I see about the markets is that it goes up and it goes down. I know the moment that I want to get in it! I choose that moment because it is supported by high probability. High Probability Trades- winners! Good money management - rich!

NB: I do not trade off slanted lines. I prefer a horizontal line. I make money when price move up or down, not sideways! lol

I hope I clarified, and simplified what I my style for you!


Greg

Thanks Greg for more info on how you trade. I have a couple more questions as I continue to demo/research your method of trading.

My first question is, if you see price break, and buy, for example, then the price closes below the open(pinbar, etc.) would you typically just kill the position at that point? That's what I'm thinking I would do, just curious if that would be your reaction as well. Basically I just figure if it's going to break the S/R it'll do it quick and hard, otherwise I should just take the minor loss and consider it a test instead of a break.

My second question is, how do you set your stop losses? I know you're busy, so feel free to explain whenever you get a chance. This method definitely has a lot more winners than losers, so just understanding a safe place to set the stop loss to minimize loss would really help.

Thanks,

Cory

Thanks, Greg. This does help clarify things in my head. It seems the patterns I saw were merely coincidental. I will do some more testing to internalize this idea a bit. I'm sure I'll come up w more questions after that.

Here is an example trade I did recently on G/U. I sold at 1.5965, 5 pips below the previous support. I've closed over half the position, and about 25% is still running with the stop loss at break even. Final take profit is at 1.5805.

Greg, let me know what you think, and please tell us more about SLs when you get a chance : )

Thanks,

Cory

Just to follow up, hit the TP and has gone down another 100 pips already

Why isn't anybody else posting? This thread is a gold mine.

Thanks Greg!

Cory

Nicely planned and executed trade. I have been riding the same waves on the EUR/USD. The move down was not as smooth as the GBP/USD's though . Keep on making the pips while you can.

Cheers

Greg

When you take trades on the g/u, do you also take entries on the e/u as well if a signal pops up? Am sure you know that they are highly correlating pairs with the G/U being a bit more volatile.

I would caution that attempting too many signals off too many pairs (am not saying you do) with this strategy, whether they correlate or not, will reduce the effectiveness of this strategy where it matters - your account's profitability.

Correlation does not happen down to each pip movement with highly correlating pairs. The same is true for pairs that do not correlate. I found that the eur/usd tends to 'lead/affect' price movement in the markets more so than the movement of any other pair. Meaning: when eur/usd has a green bar, a pair that correlate also tends to have a green bar and vice versa. The opposite is true for non correlating pairs. This is not to say that if you look at correlating pairs, their charting pattern will look exactly alike.

I guess what am trying to say is this: sticking to one pair will almost be as profitable if not more so than trying to enter with same strategy on multiple pairs whenever a signal to trade pops up.

Cheers!

Greg

Hi Greg,

A bit confused. Why are you taking a sell trade when the long term trend in EUR is clearly up?

Hey Greg,

I appreciate your advice.

I am definitely careful with correlated pairs. Sometimes I watch both pairs, and then enter on the one that seems to be most promising. They would have to both look really good for me to enter on both, and I would reduce my risk on each position to make up for the correlation.

I have been setting my stop loss at the last R (for shorts) or S (for longs), but it sounds like you have ways to safely reduce the stop-loss, thereby increasing the R:R. Please explain this when you get a chance. Thanks!

Cory

Greg, hope you're still around! I'd love to learn more about this strategy, and I'm amazed nobody else is posting. Please keep explaining and I'm sure more people will start to show interest.

Thanks!

Cory

hi cory, i have just come across this thread and i'm monitoring g/u. i was wondering if you had tried this method on other pairs as well, and if yes, which ones did you find to be the most reliable?

i am trying to work out my own trading plan, combining this and james 16 material.

thank you for any insight and good trading

Hey tradeall! Sorry I've been really busy this week but I want to start posting more trade setups here next week. I've only researched this on G/U and E/U so far. To meet it seems like this would work best on pairs that are highly traded because it relies on resistance and support being built up by orders waiting just behind recent highs and lows. For now I am focusing on E/U and G/U, but I would guess it would work okay on other majors such as USD/CHF or GBP/JPY.I think focusing on one or two is definitely best at first though to get a feel for their movement.

This method really seems to give a lot of good trades, so I'm just hoping Greg will share more about his SL. Or I hope we can figure out a safe way to reduce the stoploss, since many times these have strong breaks and never come back to the entry.

Cory

If you could tell me with a degree of certainty that the market will not go down, after it gave me a sell signal, I just might listen. But I know that no one who trades the market has that power of foresight. So I have to stick faithfully to my strategy of trading, which is ruled by probability. If my strategy says trade, and there is the possibility of good reward, I am gonna trade. Even if mentally it is hard because I see a brick wall somewhere! Who knows if price is not gonna break through it. This may seem crazy on the surface, but am at a stage where I really don't care what price does. Am more concerned about entering at the point I want and managing my trades properly!