Posted by: joetradingplace | April 24, 2015

Trading Breakouts

I have heard a lot of traders saying that trading breakouts is unprofitable. It could be unprofitable because most of the breakouts fail, however if you time your trades well, you will develop a profitable strategy trading breakouts. What I have noticed on traders who trade breakouts is that they wait for price to breakout of the range and then place a buy limit or sell order to catch the pullback….this is where some people get it wrong, because they don’t wait for price to start moving back in the direction of the break. They play the market when price is going back to retest the broken S/R…but remember most BO fails, so that why they lose.
For example lets say price breakout of a range to the upside, wait for price to come back and retest the R turned S…then place your trades when price has shown you momentum bouncing off the S. Look at the Audnzd and Gbpnzd chart below, people who place buy/sell limits (at the blue box) after the breakout would have been killed. But traders who wait for price to retest the broken S/R and then enter would have not entered any of these BO. Look at the Cadjpy chart and yu see what I mean buy buying when price has showed momentum to the upside after the BO….. This time people who placed buy limit orders at the blue box would have been profitable, but not very often. Look where I took my trade..i waited for price to come back to retest the broken R..and then I placed a buy stop when I noticed momentum picking up to the upside.
Its difficult to explain some of these concepts, but I hope you understand what I am trying to say.

Screen Shot 2015-04-24 at 07.54.22

Screen Shot 2015-04-24 at 08.00.27

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