Knowing when prices are getting ready to break out

Discussion in 'Trading' started by Joe Ross, Dec 11, 2009.

  1. Here are two ways to know when prices are getting ready to break out from a trading range.

    When prices are in a trading range, count the number of closes above or below a specific price near the vertical mid-level of the trading range. If 70% of the closes are above the mid-level price, and the market cannot rally and close above reaction highs, a severe correction may be imminent. If a market breaks and cannot close below reaction lows, then expect a rally to carry prices above the reaction highs. E.g. Let’s assume that a futures chart is showing that about 90% of the Closes are above 445.00, yet prices cannot Close above 455.00. If prices finally do Close above 455.00, a powerful buy signal would then be in place.

    Another way to determine that prices are about to break out of a trading range is to note if you have a 1-2-3 followed by a Ross hook within the trading range. If both are present, the percentages favor a breakout to follow, and entry by way of a TTE is acceptable.

    A 1-2-3 formation followed by a Ross hook is a consistent objective chart pattern for defining that a trend or swing is in process. Once the point of the Ross hook has been violated, this pattern is enough to establish that a trend or swing does exist.
  2. let me ask you something..

    if you're approach to trading is based on break-outs - why don't you just wait until they happen and then put on the trade? why waste endless random effort guessing when they will happen?

    market does the milking and packaging. not you. get too refined and you'll get skimmed.
  3. My approach to trading is not based on breakouts.

    The isssue was how can you tell when a breakout will occur. This is a question I receive at least several times every month.