How do you trade breakout without bleeding to death? | Forex Factory

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How do you trade breakout without bleeding to death?

  • #1
  • First Post: Sep 16, 2015 9:18pm Sep 16, 2015 9:18pm
Folks, recently I have been trying to trade breakout method and it seems very effective, but one problem is that all major breakout comes from a ranging market, and during ranging market, it swing so much that my position would have been hitting cut loss point.

Now I am trying progressive approach, which means open a small position first, when breakout is confirm, open some more, so even it's bleeding due to market swing, loss would still be manageable.

What's your method then? want to improve my method a little bit, thanks.
  • #2
  • Sep 16, 2015 9:57pm Sep 16, 2015 9:57pm
Quoting lkthomas
Folks, recently I have been trying to trade breakout method and it seems very effective, but one problem is that all major breakout comes from a ranging market, and during ranging market, it swing so much that my position would have been hitting cut loss point. Now I am trying progressive approach, which means open a small position first, when breakout is confirm, open some more, so even it's bleeding due to market swing, loss would still be manageable. What's your method then? want to improve my method a little bit, thanks.
Hi,

Can you give us a picture of what you doing?

Ceers
  • #3
  • Sep 16, 2015 10:23pm Sep 16, 2015 10:23pm
So, the top red arrows showing I did a long and cut loss, the bottom arrows showing I did a short and cut loss. Then finally last candle breakout and I did a long trade, start earning money.

The problem is, on market swinging like the one I highlighted, how to avoid lost? Or, how do I know if it's ranging? I have been testing ADX and seems not useful at all.
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  • #4
  • Sep 16, 2015 11:10pm Sep 16, 2015 11:10pm
Quoting lkthomas
So, the top red arrows showing I did a long and cut loss, the bottom arrows showing I did a short and cut loss. Then finally last candle breakout and I did a long trade, start earning money. The problem is, on market swinging like the one I highlighted, how to avoid lost? Or, how do I know if it's ranging? I have been testing ADX and seems not useful at all. {image}
I don't normally trade breakout, but if you do identify such opportunity. Trade it during London open time and set stop loss below the low of the previous 1 hour candle. Is the chart you shown a daily one?

I don't use any indicators personally myself, just sentiment and determine whether the day is risk on or off and look at correlations. It helps you figure out the movement of the pair at the particular day.
  • #5
  • Sep 17, 2015 12:18am Sep 17, 2015 12:18am
Quoting forexleopard
{quote} I don't normally trade breakout, but if you do identify such opportunity. Trade it during London open time and set stop loss below the low of the previous 1 hour candle. Is the chart you shown a daily one? I don't use any indicators personally myself, just sentiment and determine whether the day is risk on or off and look at correlations. It helps you figure out the movement of the pair at the particular day.

Is it profitable for you? Can you please show your chart on how you trade? want to learn more.
  • #6
  • Sep 17, 2015 12:37am Sep 17, 2015 12:37am
99.999 % of all trading methodologies are based on breakouts (buy high / sell low)
99.999 % of traders lose money

  • #7
  • Sep 17, 2015 12:48am Sep 17, 2015 12:48am
Quoting lkthomas
{quote} Is it profitable for you? Can you please show your chart on how you trade? want to learn more.
So here one hour chart. You see a lot of red 1 hour candles and if you see the momentum going down. Place entry any where in the previous 1 hour and top loss above the high of the previous 1 hour. And set TP of course.

I personally don't do breakouts enough to give you more tips on this but I am sure it is possible if you execute them correctly.
My trading style is more about finding the turning point, where the market turns, so it is the opposite of breakouts.
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  • #8
  • Sep 17, 2015 1:09am Sep 17, 2015 1:09am
Quoting Mingary
99.999 % of all trading methodologies are based on breakouts (buy high / sell low) 99.999 % of traders lose money
If that were completely true then 99.999% of traders using a false breakout methodology would be making money but, sadly, they don't.

I don't think it's quite that simple...
  • #9
  • Sep 17, 2015 1:20am Sep 17, 2015 1:20am
Quoting lkthomas
Folks, recently I have been trying to trade breakout method and it seems very effective, but one problem is that...
Then maybe its not that effective after all.
  • #10
  • Sep 17, 2015 1:21am Sep 17, 2015 1:21am
Hi. Break out trading is all about timing. Once you have traded breaks for a time you will see the pattern for the break emerge. Most of the time PA will challenge both the top and bottom of the range before moving. Having a direction in mind before the break out is important too. By looking at order flow, where fib levels are in larger tf's, fundamentals and the type of breakout pattern you are looking at will influence a direction. Once the direction is established you can see when the market begins to move and it will more than likely Fake Out in the wrong direction before moving. If your good and can establish a predicted direction then from this FO a trade with good R:R can be made. If it is wrong then minimal losses are incurred.

As I said timing including the time of day is important. Pre-Franky and Pre-US are very dangerous times to be entering a BO trade due to the amount of false moves. There is a bit of an art to it and after watching a few hundred you become accustomed to know what to expect.

Here is an example:
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As the lights go by so too do the shadows move
  • #11
  • Sep 17, 2015 1:54am Sep 17, 2015 1:54am
Quoting Matts Micro
Hi. Break out trading is all about timing. Once you have traded breaks for a time you will see the pattern for the break emerge. Most of the time PA will challenge both the top and bottom of the range before moving. Having a direction in mind before the break out is important too. By looking at order flow, where fib levels are in larger tf's, fundamentals and the type of breakout pattern you are looking at will influence a direction. Once the direction is established you can see when the market begins to move and it will more than likely Fake Out...

Yes, false breakout is a bit of challenge, what do you think if putting buy and sell pending order pre-US open? when it swing it will hit and move one direction (if everything works as expected)
  • #12
  • Sep 17, 2015 2:06am Sep 17, 2015 2:06am
Quoting lkthomas
{quote} Yes, false breakout is a bit of challenge, what do you think if putting buy and sell pending order pre-US open? when it swing it will hit and move one direction (if everything works as expected)
I remember thinking the same thing when I was learning too. I don't think it is safe strategy. Just because the move fakes once it doesn't mean it wont fake for a second time. You will quite possibly have both pending hit and when US comes online it could create volatility and perhaps have both stops taken. If you can think of a way of making it work, try it in back test to see how you go.

I use a lot of correlation to determine direction. I was just looking at WTI for the CAD movement at it appears there is a unconfirmed st top gathering so to trade long on CAD in a BO with a possible fall in oil could be risky. (Its all risky atm imo with FOMC which is why I am out of the market).
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As the lights go by so too do the shadows move
  • #13
  • Sep 17, 2015 2:06am Sep 17, 2015 2:06am
Quoting lkthomas
{quote} Yes, false breakout is a bit of challenge, what do you think if putting buy and sell pending order pre-US open? when it swing it will hit and move one direction (if everything works as expected)
How do you trade a breakout without bleeding to death?

1) Get a REALLY good signal

2) Set up reasonable stop-loss at previously amply-tested support/resistance levels.

3) Once those support/resistance levels are broken then you know you have a breakout so you trade in the direction of the breakout.

For false breakouts, you do the opposite:

1) Set up reasonable stop-loss at previous breakout levels.

2) Once it broke through the previous breakout level, put in more trades in the reverse direction

I try at most 2 times if it still does not work out, I stay out. If it broke out, reverse, broke and reverse again, I stop trading. Obviously the market is not having a clear direction. No point wasting my money further.

The breakout trading is unfortunately very difficult to code in an EA or algorithms so you are gonna have to use discipline and good chart-reading/analysis skills to trade it.

Good luck!
Make your losses in demo. Earn your profits live.
  • #14
  • Sep 17, 2015 2:14am Sep 17, 2015 2:14am
Quoting Forexia
{quote} Once it broke through the previous breakout level, put in more trades in the reverse direction I try at most 2 times if it still does not work out, I stay out. If it broke out, reverse, broke and reverse again, I stop trading. Obviously the market is not having a clear direction. No point wasting my money further.
This is very good advice. Almost always PA will do something unexpected if these first trades fail and continuing to trade will more often than not only bring more pain.
As the lights go by so too do the shadows move
  • #15
  • Sep 17, 2015 3:44am Sep 17, 2015 3:44am
How do you trade breakout without bleeding to death?

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  1. I babysit my trades
  2. Cut my losses

Would you leave your baby for a hour, 4hr, 12hrs, a day, a week?
So why would you put a stop loss and walk away?

A stop loss is for an emergency. A stop loss wasn't designed so that you throw accountability out the window.
If your trade is in profit and the wind has changed in the opposite the direction, you should be closing your trade.
Instead, you are nowhere to be found and the whole thing turns around and hit your stop loss.


Peace,
CrucialPoint

  • #16
  • Sep 17, 2015 3:47am Sep 17, 2015 3:47am
What a CUTE photoshopped baby! Awwww...
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Make your losses in demo. Earn your profits live.
  • #17
  • Sep 17, 2015 4:08am Sep 17, 2015 4:08am
How do you trade a breakout without bleeding to death ?

What's a breakout ? What dangerous animal is that ?

How many times must I tell you not to play with that no good thing !
  • #18
  • Edited 4:11am Sep 17, 2015 4:10am | Edited 4:11am
I will trade you $1,000,000 for the baby !!

http://www.forexfactory.com/attachme...1&d=1442479721

Cute as !! Boy or a girl ??
Good Trading to All ---- fairwind
  • #19
  • Sep 17, 2015 5:12am Sep 17, 2015 5:12am
Quoting skyway
How do you trade a breakout without bleeding to death ? What's a breakout ? What dangerous animal is that ? How many times must I tell you not to play with that no good thing !
I think my account would like to beg to differ, but each to their own .


Trading BO's imo is about 2:1 R:R trading. If you think about the setup for a BO (wedges, flags, C&H, H&S etc.) it is often done from consolidation. Yes, you will have to allow for stop hunts in the opposite direction (all about timing again) but ultimately a BO is more often than not the beginning of a trend. If you're not achieving 2:1 R:R then there are probably safer methods of entering a trade. Using this risk it is also possible to get the direction wrong and still re-enter in the right direction and end up with 1:1 reward.

SL's are tricky with BO's. I use a SL upon entry as it is too easy to hold a dribbling trade without clear reversal signs and for it to shoot off as the BO triggers in the opposite direction. As the trade progresses into green I too baby sit (awww cute) and watch for potential reversal signs with a hard stop set.
As the lights go by so too do the shadows move
  • #20
  • Sep 17, 2015 5:32am Sep 17, 2015 5:32am
Quoting Matts Micro
{quote} I was just looking at WTI for the CAD movement at it appears there is a unconfirmed st top gathering so to trade long on CAD in a BO with a possible fall in oil could be risky. {image}
Loonie tunes for BO trading?

Just to illustrate the R:R point I was making in my last post here's a question. If I traded this setup where do you think I would have put my Risk and where do you think I would have put my Reward levels.
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As the lights go by so too do the shadows move
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