I suspect this is more about the psychology of you trading these breakouts instead of about the technical analysis of the breakouts.
This is actually not true. 1. The weakest hands buy/sell during late breakout (euphoria/capitulation) stages. No edge here 2. The next level of weak hands waits for pullback/retest. Can still be profitable with proper risk management 3. The strongest hands buy/sell at early stage breakouts. The best traders go with the flow. Requires excellent trade management skills, and fast execution tools
A place to start Also check out videos by FuturesTrader71, who uses volume profile extensively and provides much free resources for traders.
I know sometimes price retests, sometimes it doesn't. In this case how does one know to trade the first breakout OR the retest?
By using a time tested method that aims to filter signal from noise. Once you have that figured out, you don't concern yourself with retests, but just reverse your position based on those signals. By the time slower traders recognize the retest, momentum has already shifted the R:R into your favor. If it truly is a retest you can reverse back into the established trend. It's easier said than done and requires a strict trade plan that utilizes a deep understanding of volatility, time, and price drivers. If you study enough price development (10,000+ hours), and properly test trades, it might click in.
By far (probally 70% to 80%) most BO's from ranging price behaviour fail. However, sooner or later one will not fail and the market begins trending again or reverse and begin trending in the opposite direction. For instance, when the market is in an uptrend then goes into some ranging behaviour for several bars it is generally best to go long at the bottom of the range and exit near top of the range. In a sideways market it is usually best to trade that sort of behaviour. However you can watch the bars while it is in consolidation. Are there more bull or bear bars? Are there gaps or are most of the bars overlapping? Are there consecutive bull bear bars? Which bars are bigger bear vs bull. These factors give some hint as to which end of the range the B.O. will take place. Finally, when the BO does take place watch the first P.B. What is stronger the B.O. or the P.B. as that gives some indication as to whether or not the BO will succeed or fail. If the pb is weak compared to the b.o. then the next time a bar goes higher than the previous bar one might think of entering there. If p.b. appears to be equal to the b.o. in terms of strenght then one mght think of waiting for a second entry. If p.b appears to be stronger than b.o. then that is generally an indication that the b.o. will probally fail. Bottom line any b.o. should be stronger than any reaction to that b.o. or the odds are that the b.o will fail, since most do fail. However until a b.o. appears that is successful it is generally best to just trade the ranging behaviour. Again orthopraxy must be applied for it to become second nature. Once a b.o. has proven to be successful it will probally be good for at least two legs in the direction of the b.o. so, you can grab second leg since the first legs fail so often and price returns to the range. In a bullish b.o. Higher lows (of the starting point of the b.o.) when the first p.b. ends indicate strenght. In the bullish b.o. ...big bars...high closes on the bars..gaps between closes of bars ..gaps between close of one bar and high 2 bars back ...successive bull bars ...all indicate strenght for a bullish b.o. bars. Again, orthopraxy.
A little word about orthopraxy vs orthodoxy. Orthodoxy is the correct belief. Orthopraxy is correct practice. The markets are quite fond of disrupting our orthodoxy about them. We have to learn to engage the market from an orthopraxy standpoint. What matters is not what we believe about the markets but what matters is what the market does and our reaction to that market behaviour. Orthodoxy is why traders will not take their stoploss but move it because they "believe" they are still correct. Orthopraxy would respond to the markets according to the market's action. It is a very difficult psychological challenge because when reality goes against our well studied out ..well thought out beliefs...then cognitive dissonance is occurs. This mental tension leads to discomfort and mental stress. That in turn cause pounding of the heart..sweating of the palms...begging..throwing hammers at the computer screen. LOL.
Without sounding overly critical - there a whole lot wrong here These questions I pose.., are food for thought.., not looking for you to provide a response to me Trading a BO - in relation to what - a continuation..., or reversal How do you determine if the S.., or R is real (meaning it should hold) Are you trading the BO in the direction of the predominant trend How are you id-ing the predominant trend How do you know / id if price in an actual range (and you're beating your head against a wall) Trading (entering) a BO - via a retest of a "S" or "R" - is a whole different trade - unless the "S" or "R" resides at the actual top (for S) or bottom (for R) of the range price is breaking out from - that an actual BO trade Otherwise you're entering in typical greenhorn fashion.., and getting ass raped ====================================== This momentum - caused by actual buying / selling..., or stop running..., or orchestrated to lure in greenhorns (for a quick reversal and ass rape) ======================= Varies - but distills down to who is in charge at the moment... what is the predominant trend..., what am I actually trading (BO.., PB..., reversal..., range..., continuation)..., where is the stop..., how much move is potential.., etc... eta - and of course P,V,&T ================================== On what TF More importantly; Why And how are you confirming the test (what ever test) - was real..., it really held I interpret; TTF is 1H..., looking for confirmation on the 5M Totally bassackwards RN