Learning to catch High Probability Breakouts

[jain.er]

Its quite difficult to have conviction to hold on using Technicals only. Some amount of fundamentals are required to provide you with that conviction needed for positional trades.

A case in example is of GM Brewries.

Before it broke out to reward shareholders with multibagger returns it BO twice at least to return back into the resistance zone. Now how would you decide to hold on, suppose you hold on to GMB you make good in the end but for many scripts this wont hold true ie they will go down to the dust.

To keep SL for positional trades is quite tricky, some experts say that SL is lifeline of traders but its the poison for investors.

TA for positional trade not sure how to go about it. There are few of my under test strategies.

1. Blanket firing just like Indian Bank and many others do. Just buy 52 week BO and when your gut feeling says that its time to move out sell out.
This strategy is effective in the sense you are diversifying your risks but it entails a lot of costs (demat charges) plus you will sell off your long term winners. And you make an entry in the loosers too..

2. Buy only good quality (some guru recommended or star investor into it) stocks (preferably micro or mid cap). Keep observing the fundamentals and sell off in case funda worsens.

3. Buy on the winners/blue chips on their PB to support levels.

Each strategy has its good and bad points, need to figure what works for one.

What gurus do:

They buy 10/15 stocks well research them and than invest into them for at least 2 times return and sometimes 10 times too...

 

[manojborle]

 

[Tavnaz]

Thanks Tavnaz for your concern.
I am not asking anybody to blindly follow indicators, neither I do that.
However I have found my trading has changed dramatically just with having ADX on my chart.
I am able to interpret ADX now though not mastered it and will take time.

Off course If I have million rupees I am not going to bet it on single scrip.
Money management will always be there.
I wont hesitate to enter once my chart says to go long.

I dont want people here to follow indicators blindly and If they can read Price action they wont need it at all.

Anyways the method I have suggested is just to filter out potential breakout candidates.
Once candidate is found simple strategy of making entry after pull back to 20 ema is good enough.

P.S. Note that I am not a breakout trader and always enter on pullback after breakout.

Carryon the good work.
The more charts on the forum,the better examples for people to learn and earn.
Lead by example.
God bless you.
;-)

 

[XRAY27]

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[manojborle]

Thanks for sharing Manoj. Just to confirm if I have understood correctly, posting a weekly chart. The channel broke upward with DMI also moving in same direction. Only thing is that ADX is still below 25. Is this a valid breakout?

Breakout is valid however till ADX comes above we have to be cautious.

 

[hmp]

Dear Manoj ji
Will you pl. share afl for color changing EMA (20?) as per trend, also ADX?
Regards

 

[manojborle]

Dear Manoj ji
Will you pl. share afl for color changing EMA (20?) as per trend, also ADX?
Regards

ADX is default indicator from Amibroker.

This one is Simple Moving Average

Just change MA from "Av = MA(C, Len)" to any average you want.

_SECTION_BEGIN( "Short Term MA" );

Len =	Param( "Period", 20, 3, 200, 1 );

Av	 =	MA( C, Len );

upema = Av > Ref( Av, -1 ) AND Ref( Av, -1 ) > Ref( Av, -2 ) AND C > Av;

downema = Av < Ref( Av, -1 ) AND Ref( Av, -1 ) < Ref( Av, -2 )  AND C < Av;

Color =	IIf( upema , colorGreen, IIf( downema, colorRed, colorBlue ) );

Plot( Av, "", Color, ParamStyle( "Style", styleDashed, maskAll ) );

_SECTION_END();

 

[monkeybusiness]

That is mighty big chart you have there.
But I am afraid it's blank .
Put some boxes and lines on it.and draw an out look for next 2 months.
That is a very good excercise to gain skill.
Plus it will show what is your current skill level.
Blank chart with just and indie on it is like .
I go to master chef and present a Tropicana juice pack and say chef this is fruit juice this is what I have to show for.
You catching my drift.
Regards.

Thanks for reply and message taken, I will not put my money on indicator alone, Say for example conditions given by Manoj are met, then watch for stock to make HH/HL also check fundamentals and than with stoploss enter.
Presently I am having this much of data only, Hence unable to find any supply zones, nearest demand zone is 980 t0 935, next one is 770 to 717.

 

[monkeybusiness]

Thanks for reply and message taken, I will not put my money on indicator alone, Say for example conditions given by Manoj are met, then watch for stock to make HH/HL also check fundamentals and than with stoploss enter.
Presently I am having this much of data only, Hence unable to find any supply zones, nearest demand zone is 980 t0 935, next one is 770 to 717.

Ooops, supply zone is just above, 1220 to 1100 very big aone.

 

[manojborle]

Stock to watch Infy, ADX bellow 25 since last 36 weekly candles.