Been back testing consolidation breakout strategies just wondering if anyone uses this for a swing trade type play and what are your rules for entry. I have been back testing a break of supp/res of a range then a retest of the supp/res then looking for a comfortable entry (part im struggling with). I work 9-5 so i want something to get in place my stops and targets and not have to watch it every second. Your advice is much appreciated
buying new high is buying new high... doesn't matter consolidation or not. how did this TA bs get pushed to so many people.... truly amazing.... at least half the population don't buy the global warming scam... but somehow the TA bs gets to everyone who tries to trade.
one of my friends uses this strategy on 1- min chart pattern. He hold a few seconds to 30 minutes. He consistently makes 300-500k per year, fixed initial capital pey year.
entering on pull back-which is, i think, a small consolidation is an age old method. entering on a failure of a pull back is the converse of that: after a pull back, market should continue . but eventually that will not happen and the trend will reverse
mr mario0887, what timeframe charts do you trade from? how long do you typically hold between entry and exit? thx
I don't get it, you write the entry price and you can't see it? Buy low on support in uptrend and sell resistance in downtrend. If you buy new highs, risk be below support, so huge risk, buy low and risk much less and leaves for more potential. Either way you will have losses, name of the game, but all you can control is where you get in and somewhat risk unless gap opens against position in stocks and ETF..etc. This is simple approach of basics, but my own trading, it is far more complex of when not to take signals based on recent or distant areas of concern, where price is in overall Swing based on monthly, weekly and daily and other reasons.
I've had mixed results generally trading any sort of breakout system. Mainly because a tight consolidation can really go either direction. How are you backtesting these? If so - why are you asking us? If your sharpe/CAGR is good just trade it and adjust your human-entry based on what you learn! The sharpe ratio I use as a baseline is 0.62 - which is a number I pulled from some study on the most popular large hedge funds. Of course, be aware that if you are trading on time frames lower than say...daily your sharpe ratio can be gamed by just increasing the frequency of your trades. It's important to temper metrics with logic. The mythical 1.0+ sharpe ratio is great but if you can beat a 0.6 you have a strategy that a hedge fund would probably trade.
huge risk means high probability....high probability means less reward......so if you buy new highs, RR should be 1:1....IMO time is also a issue because you do not want to wait 10 years to get RR of 1:1......but do not complicate your trading by covering all bases