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Yes TJ, right on!
My experience is that trading breakouts are a bad habit..
Painful and expensive. Weak traders want the security
of entering a position when it's already going in their
direction. This is called buying high, and is the first step
in the trading plan defined as "buy high, sell low".. Hehehe.
Look at most charts, there is usually a pullback after a
breakout, this causes breakout traders to panic and
exit at a loss, or a small profit.
If a breakout trader can tolerate the pullback retracement,
and hold the position for the longer term, they can do better.
But why enter the trade at a worse price?
What works for me is to enter on the pullback, while
price is still moving against the direction of the breakout.
So I enter when the breakout traders are bailing, they
think I'm catching a falling knife! Then price moves again
in the direction of the breakout, to my profit objective.
This method dramatically reduces slippage, makes for a
lower-risk trade, and higher profit..
Exactly WHEN to enter the pullback, that's the trick.. I
use Fibonacci techniques to predict future price support
and resistance for this.
-Neal.
At 11:46 AM 5/31/00 -0600, you wrote:
>i just want to clarify what i meant by this statement.....most of the
intraday/short
>term traders i've encountered who trade breakouts lose money due to large
>slippage and panic driven overtrading (excessive commish) in an attempt
>to make up the large daily losses they incurred.
>
>however, a few longer term traders, using setups on weekly or daily charts,
> appear to trade breakouts successfully. i can't speak for these guys, but
>it appears they are successful in trading breakouts because the trading
>frequency is much less, overall slippage and commish overhead is lower,
> and the price moves are larger.
>
>sorry guys, but all that long term waiting ain't my bag :))
>
>TJ
>
>At Wed, 31 May 2000 10:39:47 -0500, "Gaston Lang" <gastonlang@xxxxxxxxxxxxx>
>wrote:
>>I believe it was you that mentioned the masses that trade
>>breakouts and lose money. This is entirely reactive trading.
>
>
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