Hello folks,
Today I would like to talk about a type of trading I don’t usually conduct: trend-breakout trading. In a nutshell, this strategy attempts to profit from the initial breakout swing taking place just as a trend comes to an end after a momentum breakout thrust.
I usually don’t do it because of the higher degree of risk it involves: at the end of the day, you’re still fighting the overall market bias, so it takes some courage! However, if properly done, you can profit from the quick moves we usually see upon a trendline-violation: stoploss hunting might have something to do with that.
Anyway, today’s trade comes from Tim - a British fellow who took my Forex trading course a while back. As I told him this morning, it was a risky-yet-intelligent trade. Let me elaborate a bit further on the following video…
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19 April, 5:36 pm
Nice trade Tim! Thumbs up :)
20 April, 2:48 am
Hi Hector and bloggers!
I just wanted to comment that I took a similar trade to Tim’s Tuesday mid-night here on the west coast in the States,(which is your wednesday morning coffee hour Hector)on the EUR/CHF pair, but the difference being..I looked for a breakout/pull back continuation at the bottom of the trend (just above the 00 Fib level)…
Once my fib was in place i projected my targets at all 3 levels of retracement,..(they corresponded very closely to my support and resistance levels which i put in place first)
Although the moving averages were still showing a strong down trend,the 5 and one minute charts had clearly reversed ,and the 15 minute chart was showing a stalling(curling)..
I waited patiently for a breakout/pullback/cont. at the current resistance level,,and then triggered it,
and my first target of 38% Fib retracement was hit within about an hr and I set my stop loss to a plus 10.
I cut my trade into 3 portions instead of 2, and the other 2 targets of fib tracement the 50% and 68% were hit and exited automatically by morning as I slept.
The point I want to convey,,weather trading with or against the trend , I would now never enter a trade without the 1 and 5 minute chart moving averages pointing strongly in the direction of my trade,especially the 1 minute chart and that seems to be working,it’s become my “go ahead signal” or “verification” for the breakout/ pullback/ continuation I am looking to trigger…
James
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http://www.forexroadmap.com/FXvirtualOffice.html
20 April, 2:16 pm
Interesting theory James. I’m going to have a look on that.
21 April, 4:48 am
I wanted to follow up on my previous comment in regards to the trade I took which was similar to Tims.
It was actually the GBP/USD pair(sorry,,I’ve been looking at to many charts and going on memory!) anyway, I have taken snap shots of the hr. chart which shows the over all set up and also a close up of my 5 minute trigger chart. Benny or anyone else who is interested in seeing them, I’m not sure how i get them uploaded to this blog but you can E-mail me at my website and I would be more than happy to forward the 2 charts over to you.
What’s interesting ,as I was going back over the charts of the trade a few minutes ago,I had actually set the chart up in anticipation of a breakout to the downside in a continuation of the trend,the price had been moving sideways for nearly 14 hrs in a 40 pip range and then I realized after watching it for several hours that the shorter time frame moving averages were changing direction(instead of continueing to move sideways),and when I took another look at the 4 hour chart zoomed way out for a broader view the thought occured to me to put the fibonacci retracement on it,(the set up just hit me right between the eyes) and the possibility of a breakout toward the retracement looked very probable to me.
affiliate
James@forexroadmap.com
21 April, 6:18 am
Hi hector thanks for the analysis and good work Tim:)
I am spotting a similar scenario on the GBPCHF, what do you think guys?
21 April, 6:17 pm
Hello guys,
A setup on the daily EUR/GBP chart might be explotable. Looking for a long entry on an eventual pullback to the 23fib, testing 50 mov. average. and a daily support of a whole week 17-25th march. My idea was to have a common watchlist for a particular pair or two so that we can all share our sentiment try to benefit of each other’s unique perspective. Your input will be much appreciated.
-fxJunkiE
21 April, 9:45 pm
hi fxjunkie, I see your trade, am i right in saying you did get the pullback to the 23.6fib later this night.What position are you (or are you planning) to long at ?
Would you consider scalping the shorter time frames (15m chart) using hector’s system?
Kr,
Daniel
22 April, 3:14 am
Evening Daniel,
Following Hector’s cautious trading nature I did set 2 price levels on my watchlist for this week @ EURGBP . I will be observing price action if it plummets to .7880 throughout this week because recent daily volatility seems kind of harsh to be messed around with. I do not see clear pullback formation to enter so my second price target for a short opportunity would be .7760, round number, 23fib, dynamic support and of course a whole 7 day trading week of finding daily support. Short entry could be exploited at .7750 depending on price reaction with dynamic area.
Scalping is for the best traders. I do not like it.
everything under 30 min charts is chaotic and volatile and requires great market momentum sentiment.
I would like to hear your comments/suggestions on this one.
-fxJunkiE
22 April, 8:40 pm
Hi fx,
Don’t know why, but this currency pair hasn’t tickled my excitment, it seems that the pullback was too sharp, (between the 17th April @ 04:00 to 18th April @ 08:00);I would have liked it to span over a few more days perhaps.
Would you still look to go short (at .7760ish) with a breakout,pullback,continuation pattern? Or if the candle breaks the 0.7880, will you fire the trigger?
If I may, take a look at the EUDUSD (daily chart). you can see the upward formed triangle very clearly that has just broke above resistance at approx. 1.5904
Would you take this trade and go long? (having only 1 candle break the resistance line)? Or would you wait for a pullback and continuation before hitting the BUY button?
Kr,
Daniel
22 April, 10:22 pm
Good afternoon Daniel,
I am currently at work and will be back home in about 2 hours. My first task would be to take a look at EUR/USD and elaborate on it. Its getting kind of interesting to the upside.
Thank you for your input.
-fxJunkiE