Once you get your head past the profitability step in your trading journey, try telling yourself ... RISK.. IT IS ALL ABOUT MANAGING RISK in a game that is stacked against you. Once you start thinking in terms of RISK MANAGEMENT, good things might start to happen for you. Your posts at ET will change for a start and they will begin to make sense because you are thinking clearly.
Risk management, huh? Can you define risk? What is it, maximum possible drawdown? Possibility of ruin? There is no definition of risk, so I don't see how you can manage it. There is no risk and no management, only losses and stops.
With certain trading instruments (energy and currency futures), I'd say, "Yes." Also momentum stocks have excellent breakouts. You have to watch for particular price action leading into the breakout. A "textbook" trend with HL/HH or LH/LL will provide profitable breakouts until the trend ends, in which case you'll exit that final failed breakout for a scratch trade or small loss and watch for a reversal signal. A well-tested support floor or resistance ceiling also provides profitable breakouts most of the time. CL found support around 92.10 during at least 10 different 5-min price bars today as it traded in a range. When that level was breached late in the day, price broke down without hesitation and offered over 50 ticks downside with no heat on the trade. Unfortunately, the majority of powerful range breakouts occur shortly after you leave your trading platform to escape the pending insanity of watching price piss around in a range for an hour or more. So it's best to bracket the range orders with OCO orders before you take a break.
gifropan has finally added the third possibility to his a and b quandry. A P, V chart was posted that illustrates all three possibilities as the market unfolds. As you see nodoji suggests that during a VE followed by a M1 the time to enter is the trough at the end of M! as M2 begins. The profit segment ends on the FTT of M2 which is laso the "new FTT" of the original trend. LTL BO's are called VE's. Is there ever a RTL BO after point 3? Why do you think all BO's (VE's, primarily) occur AFTER point 3's? An illustration within that same neat chart occurs after an FTT and where the price approaches (during overlap) the ending RTL potential crossover. This was one of the OP's quandries. At that time (late in the chart), the dominance swung from red to black and the firts move of the forming trading short was folded back into the previosly completed long pattern. You see where the "bookmark" would have signalled the folding AFTER the RTL was touched. To some this is an FBO where the BO woulld have been the "signal" for ending the channel overlap of the two trends. We can all understand why the OP is not ready to settle down and look at the vast array of pieces he has collected. At some point in each traders lifespan (either going to success or going to final stages of failure) he becomes aware of "the pieces" and that "pieces" exist. There are 5 to 7 major steps in acquiring proficiency AFTER the discovery of "pieces". As they used to say in the 40's and 50" it is a TS situation. No one here but a few have a recorded history of going through many of those major steps. It is beyond the critical thinking ability of people simply because they are not used to doing work. It is not so much whether a person is a light weight or heavy weight in the mental department. It is more about whether or not a person can orient to thinking and using the mind. I like all the BS that people come up with on hindsight. Hindsight could be considered easy. What is it really? It is seeing a set of pieces and continuing to ignore anything that follows what is required after pieces are being discovered. In hindsight post critiques, there is no "putting the pieces together". Here are the three turns (profit segments) being sequenced at this point in this thread: 1. The hold right to the end of the VE. 2. The reversal on the end of the VE into the non dominant retrace to the end of the retrace. 3. The reversal back to dominance to take all of the profit segment going to the NEW FTT. Logging this intrabaractivity in detail in a well constructed log is easy as pie. The preparation to get to easy pie logging is about 5 to 7 major steps AFTER finding the pieces. This thread will be content to discover a few more pieces. Do you do picture puzzles with some pieces upsidedown or do you at least turn all the pieces upside down to make putting the puzzle together more sensitive and challenging. How do you treat the potential of your mind? Easy, Medium or Hard. When, after the pieces are discovered and defined, does a person turn to dealing with the context in which the pieces occur? That is a non starter in this thread and that is cool.
Hi, Both are valid ways to trade and I do both ... though not on the same stock. I expect most favor the breakout.
In all serious though, deciding whether to buy a dip with a limit order or buy a breakout with a stop order is a personal preference rather than one being statistically better than the other when it comes to long-term reward vs. risk. You can get pretty darn good at only needing 7 tick stop losses on the CL (with pullback limit orders) to get 15+ tick returns with a 50/50 chance. But there's the rub. The avg at-homer can't emotionally handle those kinds of odds in trading. They tend to constantly doubt the stability of the system they're trying to trade. Now, if you offered up the same game in the form of a fair coin flip to the same at-homer, I'd bet anything that he/she would have no problems playing that game. Why? Because it is so ingrained in everyone's psyche that a fair coin flip *is* 50/50 that he/she will no longer concentrate on the individual wins/losses but more on the positive expectancy aspect of the game itself (where expectancy = (avg win * prob win) - (avg loss * prob loss) is positive and that means you will win over many many trials).
This is very often the difference between success and failure in trading. Most traders pick and choose from among their valid setups. Say you only trade breakouts (buy new highs, sell new lows, and breaks of range S/R) because you know that 60% of them fulfill the profit target of your 7/15-tick R:R. On a given day you choose to trade only five out of 10 breakout setups because those 5 look better to you. Out of those five, four of them fail. You have a 13-tick loss. But let's say you traded all 10 setups, six of them hit target before stop. You have a 62-tick gain. Same day, same strategy, very different results. In one scenario you're the gambler, in the other you're the casino.
Hi Arhur It strikes me that you seem to be one or the wiser ET members and from some reason I have come to value your opinion. One of the areas that I feel my trading has suffered from in the past is over trading. Not OT by position size but by frequency. I normally trade a stcok index future or a curreny future mainly cable. In your opinion, for an intraday, over how many trades in a day will put a trader in the overtrading catagory? I realise this might be subjective to some extent however would you be able to come up with a ball park figure?