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How do you trade breakout without bleeding to death?

  • #21
  • Sep 17, 2015 5:44am Sep 17, 2015 5:44am
This is how I trade BO's and would have traded this set up. Right now I would be biting my nails a bit with the just missed TP (lies.. I don't stress ) but depending on the type of current pullback, it could be looking at another minor BO in which case I may extend the TP by a few pips (perhaps to the 38.2fib of the larger trend).

Anyhows that is how I trade BO's.
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As the lights go by so too do the shadows move
  • #22
  • Sep 17, 2015 5:49am Sep 17, 2015 5:49am
Quoting Matts Micro
{quote} 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. {image}
Breakout at 47.45 (Buy)
SL: 46.43

Loss: 100 points

{:
  • #23
  • Sep 17, 2015 6:01am Sep 17, 2015 6:01am
Quoting Mingary
{quote} Breakout at 47.45 (Buy) SL: 46.43 Loss: 100 points {:
Haha I bet you were disappointed with that one. I think I actually see where your at, but it would be risky (and a bit late) in my book. After a near 400 point surge to try to trade a BO at the top, I would be thinking exhaustion. I suppose I am mainly a swing trader (not always though) with my BO's, it gives the moves the best potential for movement. On top of that if your wrong then your wrong and it is pointless throwing more risk at it hoping for a turn so tight stops are always good R:R.
As the lights go by so too do the shadows move
  • #24
  • Sep 17, 2015 6:09am Sep 17, 2015 6:09am
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.

You're doing it all backward... Here are the problems I see (in bold text):

Attached Image


1- You should have gone long at the bottom of the perceived range, and short at the top of that perceived range (the 9th and 12th candles on closes basis, blue area). Even if you want to trade a breakout, starting at the opposite end is far superior.
Piling blindly with other's momentum without a valid signal is never the best idea and source of a lot of whipsaw losses imho.
New lower lows or new higher highs should have been your stops, indicating you were positioned wrongly against the breakout.
When it happens you then either go with the breakout (because that new high/low is a valid signal now) if your risk parameters permits, or wait for a pullback to enter in the direction of that confirmed breakout signal.

2- Anticipation and taking position before having a confirmed signal = jumping the gun on a signal that don't really exist before the candle is closed and won't change.
Fear of missing out is a trader's sin and should be avoided at all cost.
Let the market come to you, and make the trade on YOUR terms.

3- You take both sides of the market without taking into account the larger trend on higher time frames. This is a call to be whipsawed to death. Take a side and decide if you want to go with the trend or counter trend - If you can't decide stay out, opportunity is not there.
Trying to do both, is asking for troubles and to be lost in the market gyrations.
Getting it right is NOT as important as not getting it wrong.
  • #25
  • Sep 17, 2015 6:23am Sep 17, 2015 6:23am
Quoting fxswing
{quote} You're doing it all backward... Here are the problems I see (in bold text): {image} 1- You should have gone long at the bottom of the perceived range, and short at the top of that perceived range (the 9th and 12th candles on closes basis, blue area). Even if you want to trade a breakout, starting at the opposite end is far superior. Piling blindly with other's momentum without a valid signal is never the best idea and source of a lot of whipsaw losses imho. New lower lows or new higher highs should have been your stops, indicating you were...
First answer is very generic but very hard to do until it's too late, also, I understand breakout, pullback and continuation theory, but this kind of pullback never exists, once engine fire up, it just head off one direction without pullback, I trade mainly index, maybe it's behave like that.

How exactly do you know it's breakout upward or downward? What if you open long position at the bottom and breakout downward?
  • #26
  • Sep 17, 2015 6:45am Sep 17, 2015 6:45am
Quoting lkthomas
{quote} First answer is very generic but very hard to do until it's too late, also, I understand breakout, pullback and continuation theory, but this kind of pullback never exists, once engine fire up, it just head off one direction without pullback, I trade mainly index, maybe it's behave like that. How exactly do you know it's breakout upward or downward? What if you open long position at the bottom and breakout downward?
Imo TL's are the best indicator for BO's. This is what I would have being looking at with this chart, though it's a limited view. There is a clear line at the bottom and the top fits the range too. There are no closed candles beyond that line until the FO at the end where it shoots in the opposite direction.

Reading PA can help in this regard. One of the hints I look at amongst many is by looking at the spread. If it is increasing dramatically then the broker is preparing for long, if it is staying tight and is actually very good then be prepared for short. I'm not sure how I can tell exactly but by looking at the tick movement I can sense when the buyers or sellers are coming on board. It is just something that comes about with experience. Study a few hundred live BO's and eventually you will gain confidence. Not everything can be learnt with reading, it takes practice and repetition and even then you will get it wrong but hopefully more times right .
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As the lights go by so too do the shadows move
  • #27
  • Sep 17, 2015 7:13am Sep 17, 2015 7:13am
Quoting lkthomas
{quote}How exactly do you know it's breakout upward or downward? What if you open long position at the bottom and breakout downward?
Trading is not rocket science, the simpler the methods you use, the best it is.
Good trading methods works with any instruments: forex, indices, futures, stocks, etf, cfd, you name it.


Stop and re-read what you've written so far, part of the problem and solution is already probably in there...

Quote
How exactly do you know it's breakout upward or downward?

You don't know, and nobody else knows, that's why trading is based on probabilities of one thing happening more than the other thing, based on your tested system.
It's called an edge.
Casino's keep losing money to players but they still win in the end, because they have a statistical edge.
They don't have to know if the next player will be a winner or a loser, they just execute their system and get the profits once their edge have developed fully on a significant numbers of players.
Just imagine what would happen to a casino's edge if they refused some players for fear they would lose to them...
Same with trading, you have to accept the losses to get the winners.
But you don't have to have big losers to accept big winners

Quote
What if you open long position at the bottom and breakout downward?

It's called having a losing trade...
When having a losing trade, you just act and kill that losing trade before it eats your capital, beyond your defined and accepted risk.
You close the trade and either go with the breakout momentum, or preferably wait for a pullback and enter in the breakout direction.

Notice I use the words "you have a losing trade", having a losing trade don't make the trader a loser.
Being careful not to be taken in this kind of negative and often unconscious thinking is of paramount importance to trade your edge without hesitations.
Your edge is the sum of your losers and winners. It's inescapable.
You can't have only winners or predetermine the outcome of a trade (if you try to do it, you will kill your edge).

To sum up:
Trying to avoid uncertainty will lead to stubbornness and a false sense of "knowing what will happen next". This will lead inevitably to failure and big losses.
Trying to avoid losses will create the very losses you wanted to avoid.

If your trading results are not what you want, ask yourself if your system have an objective and verifiable edge.
Do the work to verify and validate your edge.
If you have an edge, then you have to execute it flawlessly without second guessing it, and avoid the emotional traps that can sabotage a winning edge.


Trading: the hardest easy money you'll ever make
Getting it right is NOT as important as not getting it wrong.
  • #28
  • Sep 17, 2015 8:46am Sep 17, 2015 8:46am
Volume !!

Study what happens at breakout level


Befriend your adversary then no need to lose.
Or at least know what your adversary does.
Art of War
  • #29
  • Sep 17, 2015 10:11am Sep 17, 2015 10:11am
From your example, are you really asking about breakouts following consolidation? These are my opinions based on my experience. You are welcome to agree/disagree, use/not use.

First, why is there consolidation? There are 5 major reasons for consolidation.
1. A top or bottom has been hit, but the corresponding moving averages and trend lines are not near the price point. So, price will go flat, double bounce, or triple bounce until it can breach the support/resistance areas.
2. A trend is occurring and market movement is taking a breath basically. Normally market trends occur in 3-5 stages with consolidation areas between each one. During the breath, head fakes are frequent as traders in the correct direction take profit, and those not in the market, enter thinking it is time for a reverse.
3. A triangle is being formed on some time frame, so price begins to shrink on itself as it bounces from trend line to trend line.
4. The market is slowing prior to a major news release.
5. It is a holiday or off-market hours.

There are 4 major ways to overcome consolidation.
1. The easiest way to beat consolidation is to use the same moving average that the market is using. Then you can anticipate consolidation will occur, close your trade, or wait it out to see what will happen when price meets the support/resistance area.
2. Use some type of channel or Bollinger band. It will go horizontal during consolidation, or squeeze on itself. Target above/below its control limits for your next entry. Normally, in this situation, the breakout is not a head fake.
3. Have a trend line indicator that automatically draws and go from time frame to time frame searching for the trend lines that are restricting price movement. Simply monitor this time frame for its trend line break. Be aware that 20-90% of the time, once price is totally painted in the corner and therefore MUST breakout, that the first breakout is a head fake and the wrong direction. You need something else to confirm which breakout is real. There are likely to be a few breakouts before the real one is established.
4. Wait for the news release or a more active trading session.

There are also options with various indicators that help identify consolidation and breakouts. In my opinion, the easiest method is to see a Bollinger band collapsing on price and change time frames to find the trend line that is containing price movement. Hope this helps.
You cannot be extraordinary by being normal
  • #30
  • Sep 17, 2015 10:15am Sep 17, 2015 10:15am
hello, could some of you please give live examples, it will be easier for us to understand this way.
  • #31
  • Sep 17, 2015 10:21am Sep 17, 2015 10:21am
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.
This is how I trade breakout.

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  • #32
  • Sep 18, 2015 3:38am Sep 18, 2015 3:38am
Just an example of my BO trading. The flag on EU:
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As the lights go by so too do the shadows move
  • #33
  • Sep 18, 2015 4:32am Sep 18, 2015 4:32am
Quoting Matts Micro
Just an example of my BO trading. The flag on EU: {image}

How do you know it's not coming down again ? Since it have been swinging a lot in last 48 hours. And how do you confirm it's not a false breakout ?
  • #34
  • Sep 18, 2015 4:34am Sep 18, 2015 4:34am
Quoting hytten
{quote} This is how I trade breakout. {image}
Sorry I don't get it. So the trend is coming down, there were two false breakout before, and how do you enter the market again like that? What time frame are you using?
  • #35
  • Sep 18, 2015 5:23am Sep 18, 2015 5:23am
Quoting lkthomas
{quote} How do you know it's not coming down again ? Since it have been swinging a lot in last 48 hours. And how do you confirm it's not a false breakout ?
It is what I was saying earlier about timing. I entered the trade 10 minutes after London open. I don't normally trade exactly at London open I usually wait for at least 5 minutes, if I can. At this time imo decisions have been made and the market gets serious and it has had enough of Franky open fun-and-games. Can it FO at this time? ofc but not as often.

As for the candle formation. The steady pullback after a high suggests to me that price is in accumulation. There are no steep dives from the high, just a steady pullback. I think of this as a C&H pullback (or a flag to be correct). Though it may not look like a Cup &Handle the handle part is evident and a break back above that falling TL often signifies a trend continuation. Also you will notice a H&S pattern at the bottom before the main FOMC BO, it is logic that says there is a good chance the new trend will continue if not just a retest of current highs.

As for TF I am directly looking at the 5m but I am looking at all to be sure no surprise S&R etc are hiding off the visible charts.
As the lights go by so too do the shadows move
  • #36
  • Sep 18, 2015 5:51am Sep 18, 2015 5:51am
To lkthomas n other readers,

It is important that you re-read these 2 posts by fxswing.

Very Good posts, fxswing.

The hints are there.
It may be difficult or take a long time to figure out the hints, but it is there.


Quoting fxswing
{quote} You're doing it all backward... Here are the problems I see (in bold text): {image} 1- You should have gone long at the bottom of the perceived range, and short at the top of that perceived range (the 9th and 12th candles on closes basis, blue area). Even if you want to trade a breakout, starting at the opposite end is far superior. Piling blindly with other's momentum without a valid signal is never the best idea and source of a lot of whipsaw losses imho. New lower lows or new higher highs should have been your stops, indicating you were...
Quoting fxswing
{quote} Trading is not rocket science, the simpler the methods you use, the best it is. Good trading methods works with any instruments: forex, indices, futures, stocks, etf, cfd, you name it. Stop and re-read what you've written so far, part of the problem and solution is already probably in there... {quote} You don't know, and nobody else knows, that's why trading is based on probabilities of one thing happening more than the other thing, based on your tested system. It's called an edge. Casino's keep losing money to players but they still win...
  • #37
  • Sep 20, 2015 10:03am Sep 20, 2015 10:03am
  •  Neio
  • Joined Oct 2012 | Status: Can't think outside?Enlarge the box | 688 Posts
Quoting CrucialPoint
How do you trade breakout without bleeding to death? {image} I babysit my trades 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...
Backed up by the masters...

"An expert can readily distinguish between a change of trend and a reaction. When his mental barometer indicates a change he does not wait for a stop order to be caught, but cleans house or reverses his position in a twinkling. The stop order at net cost is, therefore, of advantage only in case of a reversal which is sudden, pronounced, and with no forewarning." - Studies in Tape Reading, Richard D Wyckoff
An expert is a man who has made all the mistakes which can be made
  • #38
  • Edited 11:27am Sep 20, 2015 10:38am | Edited 11:27am
Only look at the preceding bar to determine if price is breaking out (of the preceding bar).


I read this about price action on another forum:


1) Price will either breakout of the high, low or both of the previous bar

2) Price will not breakout of the previous bar.

You cannot reduce it any further. Anything else complicates the issue.



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The trade entry is basic. Buy at bar[1] high and sell at bar[1] low. The trade exit requires skill. Profit must be protected. In the chart, the trade could have been closed in profit or the trade could have been closed at a loss. How does one know when to exit a trade in profit?

Someone mentioned probability earlier in this discussion. Statistics would be more appropriate. Probability is for dice, cards, coin tosses, roulette, etc... Knowing the statistics of the pair's breakouts can give you a clue (edge).

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The above chart shows how many times, in the last 10 bars, a breakout occurred and pip range of the breakouts. These statistics can help you determine where to place your targets and stops.
My Threads: Trading is as simple as 1-2-3, Highest Open / Lowest Open Trade
  • #39
  • Sep 20, 2015 11:34pm Sep 20, 2015 11:34pm
MasterMind Thinking

Quoting Neio
{quote} Backed up by the masters... "An expert can readily distinguish between a change of trend and a reaction. When his mental barometer indicates a change he does not wait for a stop order to be caught, but cleans house or reverses his position in a twinkling. The stop order at net cost is, therefore, of advantage only in case of a reversal which is sudden, pronounced, and with no forewarning." - Studies in Tape Reading, Richard D Wyckoff

There is not 1 good reason.

There is not 1 good excuse.

That when a trade is in good positive profit...

that for some ungodly reason, you have to close it with a negative loss.


Gann's retracement level is at 50%. If it retraces over 75-80%>>> GTFO!!!

Or you can commit all the trading sins available to man:

  1. Pray and hope that it will turn around
  2. Increase your Stop loss to provide more room
  3. Re-analyze everything to support your beliefs and dis-beliefs
  4. Re-enter as you try to catch the falling knives
  5. Hedge it
  6. Close partial lots
  7. Walk away, close your eyes and relieve your stress
  8. Go to FF, abuse and disrupt threads you dislike that doesn't go in-line with your own personal opinion


Here is an inspirational and great words of wisdom from the Master:
Do the right thing and Be a Man (Close your trades in profit or Cut your losses short)

Russel Peters - be a man

Inserted Video




Peace,
CrucialPoint
  • #40
  • Sep 21, 2015 2:17am Sep 21, 2015 2:17am
IMO it makes no sense at all to follow ANY sort of methodology.
There is no trend, there is no breakout, only the reality of your decision.
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