I think you can find situations where you have "the wind at your back" in a certain direction. I just don't find that visual patterns have helped me with finding them. I prefer abstract patterns based on math. That said, I would be surprised if you couldn't build a model that took a visual pattern like a triangle, broke it down in some way and then could calculate some kind of odds of it breaking up or down. You might be able to find traders who make a living just doing that, since clearly there are a lot of these shapes that occur on charts on all timeframes.
bump and really interested in this if anyone would like to define what they feel is a breakout. I have discussed this with ET members who contributed to Spyders threads years ago, and this was one of the topics in the threads. yes, we had defined the break in those threads, but I would like to hear other approaches if any also This thread is about a breakout, but what defines the breakout ?
I don't know, because price can reverse at any moment, so what if you define a breakout as x units and then price moves x + 1 units (confirming a breakout) and then immediately reverses and goes the opposite way even further? I've yet to isolate conditions where I can confidently say "because price did x, it is now more likely to do y." Thus I cannot predict breakouts, and even confirming a breakout only means that a breakout just happened and doesn't mean any particular thing is about to happen.
How do you trade ? Because everything you speak of regarding a chart is full of uncertainty, so I'm genuinely curious as to when do you actually feel confident on direction, if at all.
My guess would be that you would find that for any "x", the number of times this happens is greater than 0, but that for some values of "x" the frequency of this occurrence is low enough that entering at "x+1" provides a viable trading opportunity. That's just a guess, though, since I don't trade that way so I don't know the data. I like to think in terms of "possible" vs. "probable". Yes, anything is possible, but is it probable? If you haven't identified any conditions where you can realistically assess that distinction, it does make it difficult to trade successfully.
For a true read of where its headed you have to pay attention to the corporate earnings results(especially forward guidance) coming out next week. This will dictate whether the market breaks out to the upside or downside.....
Isn't it better to read price rather than news? How many times have we seen crap reports but bullish interpretation by the market because of higher chances of fed stimulus? Im done reading the news to be perfectly honest with you.
I never feel confident on direction. I trade as if the market were random. It may not be random, but I cannot predict it. If I could predict direction I would just open a position in the correct direction with my entire account. Instead, I trade the S&P long and short (SPY and SH), sometimes at the same time. I average into positions going against me. I use SH because it lets me short SPY without paying interest. I manage risk so I don't blow out. I have a lot of patience and don't care about drawdown. Last year at one point I was drawn down around $60k but didn't really care because I knew I wasn't going to blow my account and knew the S&P would eventually turn around. It ended up being a $40k winning trade with dividends from the SPY and profits from SH positions in the meantime. It just gets boring sometimes, waiting weeks/months with an open position for something to happen. I posted my totals every day in my journal thread. I still do. Here's a chart of my currently open position. As you can see, not much has happened in the 3 months it has been open. Sometimes price doesn't move much: http://www.elitetrader.com/vb/attachment.php?s=&postid=3572612 My edge is the instrument I trade (S&P), my patience, money/risk management, and the pseudoscience I use to choose entries. I usually buy when price goes down and sell when it's going up. This is after a long history of buying tops and selling bottoms when I was trying to predict price. I make significantly less than I could make if I could predict direction, but this is the only way I can be consistenly profitable.
Ya I sure remember, didnt we talk about this via PMs cause I did the same with SPY in 2011, I think it was you that sent me a PM about what I was doing. EDIT: Just checked PM, it was you indeed