Learning to catch High Probability Breakouts
- Thread starter amitrandive
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The Dow Jones Industrials index has turned lower from a Head & Shoulders neckline re-test. A similar pattern occurred at this, often bearish, time of the year in 1987 before the index fell dramatically.
http://www.zerohedge.com/news/2016-...-shows-why-17992-worlds-most-important-number
http://www.zerohedge.com/news/2016-...-shows-why-17992-worlds-most-important-number
Today we had a situation. A kind of "Black Swan" has welcomed us. The breakout to the down side was unbelievable and surely not expected in such a powerful way. All support lines on this small time frame have just been sucked in. However: It clearly proved to think again and again about a few topics very important to traders:
What ever charting is used, the rules how to trade on them must be clearly defined and must be followed. In the above shown chart (Post 4461) there was no sign to go long, as no clear pivot over the support line was identified which would have proved any such up move. So sitting on hands was the choice on this chart at the moment it was posted. You now can argue: If only traded the resistance and support levels, short was given as resistance was touched in the morning and here shorter took the chance to act. Or you can argue: On the daily time frame we are short as the support line on the up trend was broken. And yes: Absolutely correct.
But as told: Either this way or either the other way and either this time frame or the other one round is the choice, but to mix them all heavily is not to recommend, at least in my view, as all ways of choices have there flaws and success rates. Today the horizontal system showed his power, however only thought through the charting, as with the shown way from my chart the down market earliest was entered around 19'330, as around there a pivot was spotted in this down move. But any way: Charting is only one of the bullets a trader needs to work with as some more facts have clearly proved today.
Facts like: Never trade unprotected. Today this has safe'd the traders which have been cached in what ever way on the wrong side, but had or have placed a protection on the other side. This saved any they could not get out at the needed moment. And as experience shows: To think this never will happen is wrong and childish. Now such kind of protection can be done in different ways and as far as I have recognized some ideas are discussed here in the forum in certain threads. Two most simple ways are surely: Beside the long future you place a buy for long puts or you reduce your risk by placing alway two OCO stop loss orders for any derivative you trade. If one order is not filled, the other one comes into play or the other way round. Such kind of order techniques you should check with your broker and ask what he offers.
What ever charting is used, the rules how to trade on them must be clearly defined and must be followed. In the above shown chart (Post 4461) there was no sign to go long, as no clear pivot over the support line was identified which would have proved any such up move. So sitting on hands was the choice on this chart at the moment it was posted. You now can argue: If only traded the resistance and support levels, short was given as resistance was touched in the morning and here shorter took the chance to act. Or you can argue: On the daily time frame we are short as the support line on the up trend was broken. And yes: Absolutely correct.
But as told: Either this way or either the other way and either this time frame or the other one round is the choice, but to mix them all heavily is not to recommend, at least in my view, as all ways of choices have there flaws and success rates. Today the horizontal system showed his power, however only thought through the charting, as with the shown way from my chart the down market earliest was entered around 19'330, as around there a pivot was spotted in this down move. But any way: Charting is only one of the bullets a trader needs to work with as some more facts have clearly proved today.
Facts like: Never trade unprotected. Today this has safe'd the traders which have been cached in what ever way on the wrong side, but had or have placed a protection on the other side. This saved any they could not get out at the needed moment. And as experience shows: To think this never will happen is wrong and childish. Now such kind of protection can be done in different ways and as far as I have recognized some ideas are discussed here in the forum in certain threads. Two most simple ways are surely: Beside the long future you place a buy for long puts or you reduce your risk by placing alway two OCO stop loss orders for any derivative you trade. If one order is not filled, the other one comes into play or the other way round. Such kind of order techniques you should check with your broker and ask what he offers.
Bank Nifty five minute time frame. Today I will mix two systems to make it visual how it can be done. I will mix the horizontal system with the pattern and trend line system. (If you followed my last few posts you are familiar with the terms). However, if even done, then it still must be simple The red lines are resistance line which are spotted on the 30 min TF. The same counts for green support lines. If any trend channel line or what ever trend line f.e from a triangle touches the horizontal S&R levels, attention is asked for. Further a change from the bar lines to the candles is made and a simple MA system is added. With those little changes the chart looks now as following and provides complexer information which still have to be understood and even seen:
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