Hi guys -- Mark has done such a great deal on this forum for all of us. So let's thank him by using this forum to the fullest. Charles, if you read this -- sorry mate that we've let you down ... we are going to make up for it.
Come guys let's do it!!!
Mark's view on false break outs 5 Jan 10:
" There are two main methods I use for false breakouts. First one is volume. If a pair makes a big move but volume is decreasing (meaning the move was on thin markets) then there is a good chance it is a false breakout. The second one is the easiest to identify and also the tried and true: if you don’t see a good consolidation pattern above the former resistance and instead it just falls back down then a false breakout strategy is to reverse on that former resistance level. Today’s “breakout” for example above 1.4450 – it broke the price level, did not consolidate and just fell back down. My false breakout strategy would have been to short at that level had I been awake
."Mark's view on a good breakout:
"when I use breakout strategies I’ve found that the more perfect the “line” the more likely the trade will be successful "On horizontal support/resistance I am less likely to wait for confirmation for a couple different reasons: 1) horizontal (or flat line) s/r leaves less guesswork; a trend line can have multiple intepretations, span larger timeframes, etc. 2) if it looks like a bouncy ball losing power – i.e. the first time it hits support it gives a small bounce before heading right back down is sometimes all the confirmation I need. 3) in these situations the first break is many times the best
My views breakouts after sideways movement:
One should also look at M5:(1) the length of the candles (2) the volume, must tell you a story whether or not its a flash in the pan (3)the amount of candles before a retracement will give some indication of the sustainability of the breakout. I think the M5 will enable you to quickly analyse the situation.
- Here's a breakout of 110 pips as on M15
- Here's a false breakout as on the M5
- Here's the view on M5 to proof my point of a sustained breakout that yielded 110 pips. Compare the candles with the false breakout
Conclusion:
Draw a horisontal line underneath the support of the sideways movement and at the top of the resistance. Should it break either line, look at the candle bars: if it is long bars count about 5/6 bars, if it retrace it's false. If it's short it might be sustainable.
) User higher timeframe charts. 60m at a minimum. I like to use a combination of the 60m, 4h and daily charts. The more your trade matches up on all charts the higher probability it is.
2) Journal – I always come back to this. Journaling is the best thing you can do for yourself and, while you are at it, read a good technical trading book so you can apply some of that knowledge while journaling.
3) Have a plan. Before you enter ANY trade you should know a) is the trade in the direction of the trend? b) what is my stop-loss? c) what is my tp? d) at what level does this setup become invalid (and your stop-loss should be behind this level), e) is there confirmation of the trade (e.g. is there candlestick confirmation?), etc.
4) Trade less. Just plain old take less trades. In the back of your brain you know which trades you are rolling the dice on, so stop taking them!
I can’t stress point #3 enough. Have a plan for every trade. If you don’t have a plan you are not trading – you are gambling. You might as well go to your closest casino and bet on red/black instead of buy/sell – at least they don’t have a $30 spread (3 pips spread x 1 standard lot) just to enter.
tlook: We’ll have p