Hi Handle123, Thanks for outlining the tips on the chart. Whats the indication that price has confirmed support. My scare is that the price is holding support for few bars might be because the buyers can push it up so i'm afraid of the price pushing below support.
Why be afraid when you got a stop? And if you are afraid of getting stopped, wrong risk or wrong line of business.
Put 2 simple moving averages on your chart (20 and 50 for example) and ignore any breakout to the upside if the price is not completely above the 2 moving averages. Same thing for short signals, ignore any breakout to the downside if the price is not completely below the 2 moving averages. This simple technique should eliminate a lot of fake breakouts and keep you on the right side of the market.
On your chart once the market started moving sideways, you should know to either think about exiting the trade or not getting into the trade. There is no perfect way to trade without losses. Let's assume you took the breakout: 1) Trend is strong, and market keeps going up. 2) Trend is over, and market moves down or sideways. If your win % is over 60%, then risking even money on the trade over time, you don't need to change anything. If you win rate is lower, then you need to increase your reward for the risk that you are taking. Also, the most important part is to identify what trade setups are you taking. Are you buying break outs, or doing something else. Determine what setups you want to take. Determine how many there are. Have patience to wait for the setup that you are wanting to take. Keep a log of your trades. For example win or loss, reason for getting into the trade, summary of the outcome. Was there anything you would change, and how would you improve on your trades going forward. Yesterday, I was chasing trades, and ended up with a small loss which was smaller since on last trade I went for a bigger target. Today, I recognized a trade setup I could take with a good risk vs reward in that I could place my stop where the market would tell me if I was wrong, and it was not too far away from my entry price to make me feel bad if I took a loss on the trade. This was the 2nd trade on CL. It was a short that hit target. I had buy on ES going on at the same time. My ES trade went against me 2 ticks and also I got in 1 tick too soon. I decided to set the target of this trade to BE and move my stop up 1 tick so that I would either make a small profit for the day, or if ES hit BE, I would be able to get out with a normal profit for the day and also make up all my losses from yesterday. ES hit BE, so I am happy. I also happy that I stopped trading yesterday since CL went sideways near the close and I would have been stopped out multiple times if I kept trying to catch a trend. The lesson here is you don't want to over trade especially on a day where you are taking some losses. Instead at end of day, determine what you were doing wrong and fix it for the next day like I did.. If you are digging your account into a hole as they say stop digging. Hope that helps.
Also note that real breakouts rarely go sideways after the breakout, they keep moving in the new direction and, more than 50% of the time, do not even pullback to the breakout point. So if the market goes sideways after a breakout, then it's time to ask yourself if this is a real breakout to begin with, or just an illusion..
In order for me to land a breakout, I must have a position in play from before, I don't initiate during the "supposedly" breakout stage. It's a nice bonus that sometimes happens when you let winners run.
My advice, stop trading intraday. Only trade daily or weekly bars. Have a moving average trend filter. Have a market environment trend filter. Only trade breakouts that have higher than average volume. Only trade breakouts when the 60 day historical volatility of the stock that you are trading is less than 40. All my tests show that these rules significantly improve the performance of a standard breakout model.
I have read somewhere that this rule actually hurts the performance of the breakout! In other word, breakouts that occur with above average volume do not perform that well, go figure why... Bottom line, a trader should never take any trading idea for granted, no matter how "logical" it sounds.
I have multiple test results that suggest otherwise. Not at the computer at the moment but when I am will be happy to share.