Thanks for the clarifications. I'm especially interested in the RS. It might well be one of my (many ) missing pieces. Best regards.
Hi! Excuse me for my "not fluent" english. About breakouts, I would like to talk about an interesting trading tactic for short term traders: "Expansion breakout" by Jeff Cooper. According to Cooper, the best breakouts occurs when you have even a noticeble "daily range expansion". 3 rules for the "Buy": 1- today has to be the maximum of the last 2 months 2- today's range (high-low) has to be widest range of the last 9 days. 3- tomorrow set a "buy stop" some ticks above the maximum of today (ex. 0.25pt futSP) 4- set the risk (stop loss) some ticks below the close of the day of the breakout (ex. 1 pt futSP)
Be forewarned, placing a stop beneath a wide range bar can do severe damage to your nervous system if youre not accustomed to that sort of thing.
The stop is not beneath the low of the wide range bar, but some ticks below the close of the wide range candle.
Very good post here. Seems I never do it just right, but I make a profit most of the time. If the beakout does not have at least 1.5 times average volume, forget it. Maybe look at the first pullback if it keeps going. Also if a breakout is taken, and price comes back to previous support, below the breakout point, why am I still in this trade. Many ways, to trade a breakout. Keep this going. Keith
Maybe that guy predicted a breakout, I don't know. But... predict: foretell on the basis of observation, experience, or scientific reason. It's a subtle point, but when I take a position I have no idea what is going to happen next. I am not fortelling anything except I will make money in the long run, because I make more money when it goes my way than I lose when it doesn't. I am not predicting what will happen next. Sometimes I make the mistake of predicting and lose money because of it. This is also known as not trading the plan. When I play poker and call a bet with a 4-flush. I have no idea what the next card will be. I am certainly not predicting what it will be. But when I call that bet I know I will win more when it hits than lose when it doesn't. If that's not the case, I won't call the bet.
I was thinking about if there was any difference between "predicting, and getting out if your prediction does not come true" and the probability framework that I use. Operationally, no, although it might help some who have problems accepting losses to think about it in terms of probabilities. However, with research, I think it makes a big difference. I have seen a lot of people (including myself) waste time trying to find something that can be used to make a reliable prediction, which is very difficult, if it is even possible at all. On the other hand, it is comparably easy to find situations where the probabilities are skewed one way or the other. Breakouts, for example... how many are going to look for ways to predict a breakout ahead of time?
i attended the Tom demark presentation about his demark indicator at this bloomberg thing in 2003. he made that call s&p bottom out @ 865 or something. that was call within 1 point of error.
========================= RE;good breakouts & price persistancy Trader-reader Saltzburg; Another way to increase hit rate probabilities[not prediction] is to focus on a few, 7 or less , even if your quote list is much larger. GE has been in sideways trend most all of the year; high probability I will miss much or all of FIRST real- multi day/week swing traders breakout. Also volume is clearly secondary; GE has had all kinds of volume, still in sideways trend.
The best breakouts will occur after a period of sufficient basing. This is different on any given timeframe, but think of it like building a deck off your kitchen on the second floor. You can only build it so far out before it falls on itself and is not safe. At the same time it's not much use if its too small either. On a daily chart I like to see them last a few weeks. Also I find that the best breakouts occur on a large gap which continues to follow through. Additionally look at the chart for additional signs of strength leading up to the base. Thurts, laps, gaps and whatnot. This shows a strong stock that just went into that resting period and is likely to be strong again. Hope this helps. Brandon