Trading Breakouts on Fut's

Discussion in 'Technical Analysis' started by ProfitTakgFool, Dec 3, 2007.

  1. Every once in a while you get a day when every single breakout you come across works. Those days are very rare. When you put on a trade you should always ask yourself, "what will make someone buy this after me?" If your answer is, "because it broke out and less supply exists above resistance" you are destined to fail. True, less supply may exist up there but someone still has to buy it. Think about it....a method of trading breakouts is based on someone paying a higher price than you at an already elavated price. What is the probability of that? It's not zero for sure but it's not near 90% or 80%, or perhaps even 70%. Buying a breakout AFTER the market has run a bit is a poor trading method. Add a random (the market is both random and technical), wipsaw element to the market and you have a recipe for disaster. Your 1st, 2nd, or 3rd attempt at catching that breakout will give you nothing but losses until the 4th one works when you have given up. Sound familiar?

    Are buyers more likely to buy after the market has fallen some? Yes. Can't the market fall some "more?" Of course. The key to trading futures - at least one of the keys - is to buy the market when prices have fallen to extreme levels or sell the market when prices have risen to extreme levels. Naturally you don't want to do this when the Fed cuts or hints about cutting rates. Never fight the Fed! And never trade breakouts. If you want to succeed in this market you have to come up with something a little more sophisticated than, "I need someone to pay a higher price for me to win."

    Buy down, sell up!
  2. Shagi


    Some of us thrive on buying when the market is rising and pyramiding all the way up until the last trade turns into a loss- buy strength.

    and Selling when market is dropping and pyramiding all the way down to hell - sell weakness

    For certain reasons we dont believe in buying because its too low or selling because its too high - we do the exact opposite. Enjoy.:mad:
  3. avarus


    Then poof all your paper profits eliminated on a relatively slight reversal.
  4. avarus


    Averaging against the market will always make more money than averaging with the market. If your going to average with the market you have your full position on at the bottom or the top or you will see lots of paper profits go poof.
  5. There are different types of breakouts (I know of at least 9 different breakout approaches I've seen discussed here at ET)...

    Which one are you talking about specifically (post a chart example)???

    Also, one of the keys to profitably trading breakouts is to know why they tend to fail.

    A trader that doesn't know one of the most common reasons why breakouts fail shouldn't be trading breakouts.

    Another key to profitably trading breakouts is to recognize when the price action has changed for the worst after your entry and prior to the protective stop/loss being hit.

    Don't get married to the trade.

    Simply, regardless to the type of breakout method being used, we need to know the strength and weakness of the method to be able to exploit it for consistent profits.

    The best breakout traders I know are also good faders of breakouts..

  6. Shagi


    Poof there goes a slight reversal or maybe not bu what ever we are running for the exit doors fearing of losing our paper profits. poof there it goes higher and im out counting shoulda would coulda profits poof wont do it next time - poof again we run for door. Enjoy :mad: