It's tough to identify the difference between a good or false breakout in the breakout of a range, but in general, if a single bar shoots up out of the range then comes back down to close below the range highs in the same bar, it was most likely stop running, whereas if the market trades up out of the range for 3 or 4 bars, then retraces to the prior highs, it is more likely a valid breakout and a better entry at the range highs. You could also do some backtesting and see if there is some percentage threshold that would indicate a valid breakout. For example, if it breaks out more that x% of the amount of the range (high minus low), then that would indicate a likely breakout, and you could begin to add on pullbacks. In uptrends, I look for pullbacks to the prior pivot high which often acts as support. Additionally, I may look for a pullback to a moving average, or alternatively, I'll use stochastics or RSI or some other technical indicator. I'll use the indicators I just mentioned based on which ones seem to work best for the particular market and time frame I'm trading. Also, I usually just use the most common settings for indicators, but will adjust them to better fit the market and time frame, if necessary. Wish I could be more specific, but I haven't found anything specific (i.e. the holy grail) that works consistently over time, even for a single market in a single time frame.
No problem... just trying to give back a little . I've learned a hell of a lot from the some of the members of this forum.
Your Q's show a nice set of observations. Breakout is in a trap that prevents him from getting to where you are. His last chart was a one hour hold, for example. Once you get out of this trapped level of trading, you will see that your first Q has to have a yes answer. The whole thread illustrates how people do not do well entering properly and so they go to a secondary method to compensate. By posting a flat chart as a gee whiz graph it is not possible to make any progress in learning to make money. The way to get past possible confusion is to learn how markets work and then monitor them correctly. The guy who started the threads has these two problems to address. Once addressed, then you can trade all trends and make money a fairly large % of the market's open periods.
What a great thread this is. Thanks to pawpaw for starting it and all those who have contributed. I must go and print out all the charts for a little bedtime reading tonight.
"1. I like to enter when the bar "crosses" the moving average. This is an "anticipatory" entry. 2. I use market orders. But, that's only because I'm lazy. You can guesstimate where price will cross the ma, and use a limit order and get the fill at your price. With Tradestation you could easily automate your entry with something like this: buy x contracts next bar at average(close,20) limit; Then once your position is entered your exit could also be automated. The whole thing would probably work really well.
Hi Jack...If you're talking about the last (2 setups.png) chart I posted, it wasn't an hour hold. The first setup was from 9:13 to 9:18...about 5 minutes, and the second setup from about 9:23 to 9:28...another 5 minutes or so. I'm pretty much a scalper. I don't like to be in more than 10 minutes or so. And, I'm not trying to post "Gee Whiz" charts. I'm just trying to give the guys, nice clean examples. But, just out of curiosity, if these trades were for a hour, could you elaborate on how I've put myself into a trap? Thanks
Breakout, Thanks a lot for the tips. I cant get the 2nd chart - elite says there is an error - can you post it again? pretzel