September 8, 2011
- in Uncategorized by schooloftrade
Trading Breakouts & Fake-Out Breakouts
Trading Breakouts:
When price pushes higher than previous highs or lower than previous lows.
Often called ‘Higher-Highs and Lower Lows’ a breakout is a very strong clue to the market direction for the future.
The difference between a higher high and a breakout to new highs is the defined trading range.
Successful Breakouts:
The key to the most successful breakouts often comes BEFORE the trade ever occurs.
We read tape, we look at the price patterns, and we look at the speed and momentum as price attempts to breakout.
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| Successful Breakout |
Unsuccessful Breakouts / ‘Fake-out Breakouts’
As price tries to breakout to new highs we get..
– Slowing speed at the highs
– More big sellers at the highs
– Momentum is overbought at the highs of the range
The unsuccessful breakout then turns into another pattern, we call the ‘2step’ short in this example.
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| Unsuccessful Breakout |
How about using different price structures?
– Sideways Range was our first example.
– Price Channel (bull/bear)
– Price Wedge
Big Money?
– We look for the larger orders on our time and sales window to qualify as ‘big money’
– Different markets may have different definitions of big money.
– Crude/Gold/Russell/YM/DAX/Nat Gas (illiquid markets) have one definition
– ES/FESX/Bonds/Euro (liquid markets) will have a different set of definitions.
Time and Sales Window Colors?
– Watch this video for the basics of reading time and sales
– Once you learn the basics, then use this lesson to practice tape reading.
