Thank you, I have been doing pullbacks rather than trading the initial breakout, my thought is that it is a better risk v reward rather than trading the first breakout, or I can identify a false breakout if it breaks out fast, but pulls back at the same speed into my area of interest (which I would skip). Does volume = more volatility? I trade spot FX, so will start backtesting these breakout patterns and their behavior in different session, Asian vs London/NY. Since it is much more quiet in the Asian sessions I assume it will fail more often (will put in the work to find out). One thing I have noticed is that momentum and short pullbacks are best. If the momentum is really strong, identifiable by comparing the current breakout swing and the swings inside the consolidation.
Each market IS different, so to give a common answer dealing with volume, there isn't any, and more volume does have some to do with increase of movement, people paying more and price increases and volume increases, but at some point, volume declines=lack of interest, so when doing options and spreads, when you do credit spreads as nearby should cost most of the run up, when it doesn't, make sure it still costs more than it should otherwise you be selling at a discount.
You suggesting you were trading with real money prior to the backtesting ? Just remember what lawrence-lugar stated... Trading is part art and part science. Yet, I prefer to say that trading is part art, part science and part psychology. Therefore, your backtest results may show 50/50 in the area of science but the part art and part psychology is what makes you a profitable trader or a losing trader. There's a short lived trade journal here at ET where someone only had a 42% winning trade system but he (maybe a she) was a profitable trader mainly due to position size management and making sure that most of the profitable trades were much larger than the losing trades...trades were called in advance. My point is this...when you do your backtesting...its not going to provide you with enough information but it is better than nothing. Thus, you're going to also need to review all those trades you've already been doing and closely examine trades that were winners versus trades that were losers. Good luck, its a ton of work and most don't do it. Yet, the more documentation you've been doing of your past trades including charts of those trades...the easier it will be able to pull useful information when you do your review.
I have been using a small account the past few weeks, mainly trading quick retests of breakouts, positive so far. But I ask myself this question whether it can be better? Especially a lot of times it is just a expansion consolidation instead of breakout and I get caught there, becoming a loser. Handle has given me great advice.
How price moves, what may move price and how inefficiencies can be exploited, must be studied, internalized, iterated upon and practiced. Simple breakout/consolidation-systems, what are they based on? Not everything: a diagonal or horizontal line being broken or containing price action? May not mean much if there's a line just above or below it, or even when no extra lines are there. So you need something more. Higher timeframe trend, might help, how much will it help? Too high timeframe trend will not work for a too low timeframe trade. Then there's trade management. How do you prevent getting stopped out, guaranteeing a loss, or lose so little it's meaningless, minimizing losses? Unless your broker gives you free trades, you'll need to cut down costs to a bare minimum, as all costs will be part of your anti-edge. Then there's trade tactics and strategies. How often can you expect a pure bull/bear-market and how can you adapt to less stellar markets, which are more the rule than exception? You'll discover the inefficiencies may force you to becoming less efficient in the process too, instead of hoping for the next rocket launch every trade. Why commit to a trade if it may put you in a bad position at some higher probability, when you can commit to trades that are easier to manage later? What are the give and takes of each action you can possibly take at any point in time? THEN there's psychology. Most people I talk to about trading usually ignore their losses and costs, brag about a few good trades they made in the distant past while failing to explain why they made it. Won't say why they stopped trading if everything were so good as they say.. When people can't admit to others or at least themselves wether and why they failed, how can they ever improve? The type of necessary psychology will need to be relentless pursuit of finding flaws in yourself and the way you work, at all levels. You may find out there's feelings inside you, of not wanting success: fear, paranoia, insecurities, guilt, confusion. Need to go through them all and find ways to cope. Later, portfolio management, but gotta master the levels above first. So trading pullback in breakout or any other pattern may or may not be a good idea. What matters is why you do the trade, what backs you up, on all levels. If it's based on hope, because it seems breakout's what price do all the time, or "everybody knows the market consolidates" 70% of the time, then I can't see the trader overcome all the negative edges provided by the market by default (max pain). At all times there's sharing. Successful people share all the time and grow by leaps and bounds beyond the average. Nothing can be truly lost when you are abundant.
I have a question, you feed the weak hands their stops at retest, I understand that. What causes price to pullback and retest? What is the psychology behind it? And what is the logic behind the break of trendline, it becomes support/resistance? I am thinking it works because everyone is looking at the same thing. I assume its something like this. 1) price breakouts because of weak hands, riskier buyers/sellers 2) smarter and less risker hands sit and wait for retest 3) not enough buying power so price comes back and retest 4) strong hands come in and feed the weak hands their stops and causes the market to move