During the past several "range-bound" weeks, breakouts have not been as effective as one very, very simple strategy: Buy support Sell resistance Those with fancy shmancy systems probably won't admit this! I have several trading styles that I use depending on the market environment -- I am still using my "range-bound" style. Notice that over the past few months, the market has tended to set it's high and low during the first few hours. Note these levels and start flipp'in between'em.
No doubt about it. Summertime trading breakouts have lower than normal profits. Last year was an exception. This year seems to be below average for price based breakout methods. Voltility breakouts have done well all year (profitable every month including this one), breakouts for signals and pullback for entry have also done well this year. My breakouts based on trying to capture range days haven't had many opportunities. Last year we had 49 trend days. So far this year we've only had 19. I've adapted my price based breakouts to use targets during the war when we had no followthrough and that worked well. If volatility doesn't pickup in Sep., then I'll have to switch them back to using targets.
Those who trade, say ES/NQ intraday breakouts, what do you look for as a signal whether or not to take the break ? I see wha looks like several breakout type set ups intraday that it seems there would be some nice opportunities. I started daytrading doing breakouts only and lost my frickin ASS. So, I started doing almost the opposite which is using days highs/lows as support/resistance instead of a break for new high/low it it serves me much better. Of course there is more to it than just the simplified description given, but, any ways, what about those intraday breakouts ? What separates one from the other to those breakout traders ?
I have one intraday breakout method. Draw linear regression line, make channel at 20% of previous day range ( has to be more then 12 pts ) and then trade breakouts of it with intraday trend . Walter
Ditto what Greendog said. There are times when trading breakouts is probably the most profitable way to go, but this month Market Volatility has been very low. On Linda Rashkes homepage she has a Compression Meter (www.lbrcapital.com) and that has gone now "(44 days with no reading above 60 is the record which was set in July 1987)". This obviously shows a very tightly wound market. On the "plus" side volatility is mean reverting so we should see some nice breakout type trading opportunities soon, but this month definatly has not been. Brandon
I'm assuming you're talking about a price based breakout. Those are usually done with a confirmation of the direction of the break. For example, a widely known price-based breakout method is to wait for a day where the market gaps above the previous days high. Then wait 1 hour for the range to be established. After that, as long as the range is less than 90% of the 10 day average range and the low stays above the previous day high then buy when a new high is hit. Exit the trade on close. Use stops as you desire. Here's a perfromance summary of the method with the ES from 1/1/98 - 6/30/2003 assuming $5.00 commission and $25.00 slippage per-trade. P.S. Sorry to hear you couldn't make a go of it with breakouts. Everybody has to find a method that fits them and makes them money.
Everything depends on the bigger picture. You have to look at what is the environment in which the breakout is occuring. You should even fade some depending on the data. In a bigger scheme the breakout is just an incident or an entry/exit point.