Scalping low volume consolidation breakouts ES, YM

Discussion in 'Trading' started by wiesman02, Jun 22, 2008.

  1. Hey traders ! I'm starting this thread because I've failed to see any threads regarding low volume consolidation breakouts and how to trade them on the ES and YM.

    I'm just looking for some thoughts and comments on how some of u trade this set-up if you trade it at all.

    What is a low volume consolidation breakout ? The title pretty much sums it up. This set-up usually happens during lunchtime 12-1:30est or somewhere around there and always right after a strong trend. Price reacts during this consolidation usually by
    ranging creating somewhat equal highs and lows.

    When does the consolidation breakout ? Usually when volume slims down to its lowest point in the range. I've also found that they last roughly 30-45 mins on YM before breaking out.

    Now the hard part for me. I find it difficult to predict direction of these breakouts. These are VERY profitable entries if u pick the direction correctly. Even if you completely guess at the direction (which I don't recommend) and you're right 50% of the time......if you can place your long entry close to the bottom of the range, and have a 10 pnt stop, if you pick direction correctly, you will have at least a 20 pnt gain on most occasions. These breakouts don't always result in new trends, but they can result in large pops for a few minutes. Smaller time frames like the 1 min is important w/ this set-up.

    My question to you all is as follows: What are some ways in which you can get better odds at picking direction correctly on these trades ?

    Many times I'm watching this set-up, and I'm saying to myself "Man, price is gonna pop strongly very soon" Unfortunately, many times I dont know which way it will go.

    Any tips ?
  2. Hello Wies...

    I suggest you study the info/charts in the following thread...

    Your comment "When does the consolidation breakout ? Usually when volume slims down to its lowest point in the range. contains much of the info needed to make a probabilistic prediction as to direction.


    EDIT: one caveat... volume is only useful when used in the context of the price action being analyzed... For example, If volume was the only criteria, a swing or position trader would have missed almost the entire March-April-May (April Fools) rally.
  3. thanks Oso, I'll look into it