Are u a trend follower, NoDoji? With regard to big winners outweighing small losers, that's fine, but you need to ensure sufficient numbers of big winners. Otherwise,it's like betting on a single number on a roulette wheel.
Yes very much a trend follower. I'm usually positioned for breakouts in advance, though, so I haven't bought too many tops or sold too many bottoms lately I use very tight stops on breakout trades, so my R:R is excellent when I trade them. I have no problem trading counter-trend off a reversal signal (DB or HL in a downtrend, DT or LH in an uptrend), once a trend gets "tired". It takes a lot of screen time, IMHO, to know the difference between a tired trend that's likely to reverse and a consolidation pattern in preparation for another strong continuation move. I note S/R levels in several time frames before I start trading for the day, which is very helpful in determining when supply is likely to overtake demand and vice versa. I'm sure market profile traders have a proper road map for that
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Thanks for your reply, NoDoji. When you say you are positioned for a breakout, i assume you are buying or selling before the actual breakout. How do you know if there will be a breakout or not before the event?
When i position myself for a break out.. it means I enter the trade before it happens... obvioulsy you get lots of headfakes and you must be willing ot get in and out more than few times sometimes to get teh trade to work.. basically if in a triangle.. buy inside the triangle/sell... same with support resist.. buy or sell within the chop.. wait for teh break out.. the problem is not positioing yourself for the break out.. it is picking the right direction.. NORMALLY.. very low or super low volume will precede the breakout since this allows the break out to actually occur.. when there is little or no volume.. 1 min ute or 5 minute chart.. adn a triangle pattern.. then you can rest assured a break out or break down is surely coming.. wiht little or no volume it is easy for big traders to push the market aroudn or essentially paint the tape to their liking.
Interesting. So basically you're looking at volume. If there was a fair amount of volume, you don't anticipate a breakout and if there is little volume, then you do. Would that be correct?
Ideally, I like to be positioned in the direction of the trend from a pullback entry. An example from today would be a short position I put on @ 103.28 (break of the 11:25am ET bar low). Price had put in lower highs and lower lows, so I wanted to be positioned short for the next lower low. I placed my sell stop at a price that broke both the consolidation range low as well as the 20 EMA. The breakout (lower low) never happened in this case, with price putting in a higher low, but I was positioned at an ideal level in the event the trending pattern played out. If I miss the pullback entry for some reason and price is coming pretty close to a breakout level, I watch the 1-min chart and the DOM for signals to enter before the actual breakout occurs. Especially if I see large size on the DOM at or near the breakout price, I often use that as my signal to enter early because the large size seems to act as a price magnet. As TZ noted, you get lots of headfakes in low volume consolidation/triangulation and you definitely have to be prepared to scratch a few times and also be prepared to reverse if the breakout fails to materialize or fails to break with conviction. When I shorted @ 103.28, I was fully prepared to be the trapped trader 1-ticked into selling the bottom of a range and would've reversed for a break in the opposite direction if that happened. Eventually, you catch a real wave.