After several questions, I would like to show how I trade break outs....... I see a lot of charts mentioning "buy after the break out" but nobody tells you when to buy and how to avoid buying and seeing the price going back in the previous pattern and cancelling your break out. Many traders call it a "fake break out" but imho its not fake. Such peaks are telling you something and may even lead to repainting your pattern......
First of all, I am on a bigger timeframe looking for patterns. Normally 240m or 60m, the chart above is only for showing some examples.
When I detect a pattern I already have a good feeling which direction it should break out, so i start looking at my indicators (RSI, MACD, Stoch) if they confirm my ideas.
Counting the legs (1-5, or ABC), I know where to expect the breakout
Once the breakout occurs, the real action starts and its getting tricky! I switch to a lower timeframe...60-15 minutes.
You can buy AT breakout of AFTER breakout. Usually I buy after breakout when I see a Trend Contination Pattern.
Byuing at breakout is risky as it may result in a fall back in the previous pattern (mentioned as "no follow up" in the chart)
I wait till I see some sort of consolidation and mostly a retest of the previous trendline. For example: when we have a breakout to the upside, I look for a bullish TCP, mostly a bullflag.
After detecting a TCP, I wait for a strong, fat candle in the desired direction what is a sign for me to enter the trade.
I only enter a trade AT breakout when its a really strong impulse, which is still very tricky. Don't just enter a trade when the candle move out of the pattern. It should be a strong move. With this strategy, you avoid buying a break out what appears to be none. You enter the trade at a later stage, but your risk is way lower! Better safe than sorry.
**Trade what you see, not what you think**
If you like my idea, pls give a thumbs up. Questions or you don't agree? Write a reaction and we can discuss ;-)
Thank you for your chart.
The hardest part is to undestand, and be able to "trade what you see, not what you think"
RayBan1711
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Im a big fan of your charts en overal skills Ed! so when you see a breakout and start trading, do you set a limit for yourself when to see like between 5 to 8 % rise or do you just trade/sell what you see happening before you?
Thanx for the reply and keep up the good work!
Solstics
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I hardly ever buy during breakouts, I try to wait till the price drops to support lines. Using support lines gives you an idea of how low the price might go and where to set your stop loss. People are quick to fall into the hype. I initially bought neo at 0.0047 before it exploded to .0085. Based off previous analysis where the price bounced off this price range.
Crypto_Ed
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@Solstics, do a test: draw 10 lines randomly on a chart. Now insert a random pricechart. Check how many S+R hits you have!!! Thats why i dont trade S&R....you can find them everywhere on a chart
Solstics
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@Crypto_Ed, very true. I use them with different metrics such as the stoch, mfi, and other technical tools. Was a vague statement since I'm on my mobile. Overall I use a combination of different tools, Fibonacci being one of my favorites. Overall great post.
dctobkk
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Great advise. So easy to get caught in the moment and buy the break. Waiting for consolidation is wise.
goldbug1
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Excellent article sir! Love the **Trade what you see, not what you think**. I couldn't agree with you more!
pozresn
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Ed you rock man
chuntug
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Don't worry about the 'low' number of likes. This is not facebook :) Great charting and great background info! Keep it up man!
Crypto_Ed
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@chuntug, I was not really worried, more surprised seeing the number of likes compared to some top posters where I saw some doubtful setup getting hundreds of likes ;-)
In the end, that like system is not really a thing for me. I admit that I also often forget to like a good setup haha
The hardest part is to undestand, and be able to "trade what you see, not what you think"