1⃣Breakout without any retest
2⃣Breakout with a re-test
3⃣Breakout with a hard re-test
4⃣Failed breakout
Following tweets explain each one of those with examples from recent breakout alerts
1⃣ Breakout without any retest
If you have a stop-loss placed below the chart pattern boundary, this is the easiest to trade. Following the breakout your stop-loss will no be challenged and price target will be met.
If you have a stop-loss placed below the chart pattern boundary, this type of trade may test your patience but still will not challenge your protective stop-loss. Chart pattern boundary will even offer a new entry opportunity.
$NDAQ $QQQ
3⃣ Breakout with a hard re-test
If you have your stop-loss below the chart pattern boundary and it is a tight stop-loss, you might get stopped out depending on the hard re-test.
A trading tactic to re-enter: immediately after price recovers above pattern boundary
$JD $QQQ
4⃣ Failed breakout
If you have your stop-loss below the chart pattern boundary, price will fail to hold the breakout level and you will get stopped out. These are part of trading breakouts. It is important to always have protective stops (BELOW PATTERN BOUNDARY) in place.
$INCY
There is no perfect stop-loss strategy.
There is no perfect indicator that will warn you of failed breakouts and improve your win rate.
There is "leap of faith" 'courage to pull the trigger" with those breakouts.
There is managing risk via protective stops and position sizing.
A recent breakout alert on $AUY YAMANA GOLD is a good example to feature the breakout with a hard retest
Even though the price held above chart pattern negation level, it dipped below the pattern boundary
Those who had tight stops had a chance for re-entry with renewed strength
Wouldn't it be great after a breakout if the pattern boundary was not challenged at all? Unfortunately we have to deal with different type of breakouts. Out of those 2 are easier to manage than the rest.
1⃣Breakout without any retest
2⃣Breakout with a retest
Examples follow...
1⃣Breakout without any retest
A recent breakout alert. A good example to highlight the importance of acting at the time of the breakout.
#THREAD A text-book example that we can learn many fine points of classical charting and technical analysis. $LAUL.NS #INDIA#SENSEX#NIFTY
1) A well-defined horizontal boundary being tested several times before a breakout or breakdown.
2) Right before the breakdown, a short-term chart pattern (pennant) is forming in preparation for a breakdown. Difficulty to rebound from strong support, early indication of a pending breakdown.
This is not about charts. It is about the frequently read and discussed trading journal and record keeping.
How it can help to overcome your impatience with an ongoing trade and the constant urge to do something about it.
I'm a big believer of setting strategy/tactics and managing trades when markets are closed. I try to avoid making decisions when markets are open. I can't say I have fully mastered it but with today's technology it is becoming easier to resist the temptation to override decisions
How many times you have acted on a breakout, placed stop-losses, had price targets in place but exited much earlier that the plan? Took profits but left a big chunk on the table...