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Breakout

The document discusses breakout trading strategies for trading ranges. It defines what constitutes a range in price action, how to identify intraday and longer term ranges, and rules for trading the breakout of a established range. Specifically, it outlines trading the first pullback after a range breakout, setting the stop loss past the event that triggered entry, and using the average daily price range to determine profit targets. Active trade management techniques are also provided to lock in profits while allowing for price fluctuations.

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M Zaid AS
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© © All Rights Reserved
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Download as PDF, TXT or read online on Scribd
552 views

Breakout

The document discusses breakout trading strategies for trading ranges. It defines what constitutes a range in price action, how to identify intraday and longer term ranges, and rules for trading the breakout of a established range. Specifically, it outlines trading the first pullback after a range breakout, setting the stop loss past the event that triggered entry, and using the average daily price range to determine profit targets. Active trade management techniques are also provided to lock in profits while allowing for price fluctuations.

Uploaded by

M Zaid AS
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Trade When its moving and not a moment sooner

Break Out Trading

www.trading-strategies.info

What you can expect to learn

Three simple questions to ask before you place


a trade
What I class as a range
How to identify range trading opportunities
How to assess them for potential
How to trade a range break out
And a few other surprises

Business Plan

Where Im now?
Where do I want to be?
How Im I going to get there?
Where is price now?
What is it doing?
How can I get involved? (remember there are 3 trades
Long, Short & Flat)

Assessing for intraday potential

Objective for day trading an average days


movement
ATR average true range
Is there potential for movement on XYZ cross
rate?

Assessing for intraday potential

What is a range?

A consolidation pattern
Generically I call most types of consolidations a
range
This keeps things simple
Dont have to worry IF I have identified the
pattern correctly
Dont have to worry about the pattern developing
into something else

What is a range?

Trend line & price action evolution

Generically a range, evolution not a consideration now.

Skipping ahead too much now


Lets back track

What is price action?


What is a Trend?
What is a range?
How can I identify which phase the market is in?
When does price change from going up to going down?
When price is making;
Higher highs, Higher Lows Trending up
Lower Highs, Lower Lows Trending down
Price making Neither Higher Highs Higher Lows or Lower Highs
Lower Lows Price is ranging

Price Action Building Layers on the chart

I define a swing high as;


A three bar combination
A bar preceded and
succeeded by lower highs
I define a swing lowas;
Athree bar combination
A bar preceded and
succeeded by higher lows

When does the trend change?

A Short or Bearish Bias Change occurs


when the following sequence develops.
HH>HL>LH>LL>LH The bias change is
confirmed when price moves below the las
lower low made as highlighted on the chart.
Another way of saying this is 123 reversal
and you are trading the pullback as your
entry trigger (Red Line).
There are a few variations of this pattern but
this is quite simply aprice action bias
changein its simplest form.

ALong or Bullish Bias Change occurs


when the following sequence develops.
LL>LH>HL>HH>HL The bias change is
confirmed when price movesabove the
lasthigher highmade as highlighted on the
chart.
Another way of saying this is 123 reversal
and you are trading the pullback as your
entry trigger (Blue Line).
There are a few variations of this pattern but
this is quite simply aprice action bias
changein its simplest form.

Intraday Ranges

The Ideal location for an overnight range is


at/near the high or low of the previous days
high/low.
If price is consolidating in the middle of the
previous days high/low range, this is typically
indicative of continued larger range bound price
action

Intraday Ranges

The overnight range is typically a consolidation


period during the Asian trading session between
10pm and 7am the following day (UK hours)
Dont get hung up on price ranging between
these times.
The range can start a lot earlier and not break
until a lot later than these times.
Im looking for where the majority of price action
has been contained during this period of non
trending activity.

Intraday Ranges

Intraday Ranges

Ideal Range

Non-Ideal Range

Larger Time Frame Ranges

These can develop on any other time frames. I


use 60 minute & 240 minute charts
Obviously you can use larger time frames if you
so wish.
Patterns on these time frames would typically be
considered for swing trading

Larger classical Time Frame Ranges

Break Out Rules

Trade the first pullback after the


break out of the established range.

Stop loss goes past the event that


caused me to get into the trade
Targets and trade management
for intraday trades are based on
an average days movement taken
form a 100 daily ATR
Targets for swing trading (longer
term) ranges are the height of the
pattern added to the break out
point.

Break Out example

First pullback bar creates entry above the break out high

Stop loss goes below the lowest point of retracement after the break
out move was made

Targets based on average days move

Break Out example

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Break out example

Active Trade Management - ATM

First Priority REMOVE THE RISK


I trade in multiples of 3 lots, I will look to remove 2/3rds at 50% of
the size of the stop loss size. For example, If I have a 30 pip
stop loss 50% of the stop loss size is 15 pips, 2/3rds of the
position will be removed at +15. The last 1/3rd of the trade
remains with its original stop loss level. If this last 1/3rd gets
stopped out then I will have overall a break even trade.
2 x +15 = 30 pips
1 x -30 = -30 pips
Profit on overall position If stopped out last 1/3rds = 0 pips

Active Trade Management - ATM

After I have scale out of the trade I am then looking to lock in


profits while at the same time give the trade the opportunity to
fluctuate.
My ATM Rule is;
Once 65% of an average days move have been done
The stop lossallowcated to theswing portion of the trade (where
applicable) is moved to the entry point for the trade
AND
The stop lossallowcated to theintraday portion of the trade is
moved to past the 2nd previous swing high for shorts, swing low
for longs.

What you should have learnt

The 3 basic Questions


What I class as a range
How to identify a profitable trading opportunity
How to read price action
How to find an intraday range
How to trade a range break out
My trade management tactic
How to lock profit in using ATM in a logical and
mechanical way.

Thanks Folks
Please Visit www.trading-strategies.info to
read all the information presented here
Watch video presentations at your own
leisure
Or to simply ask a question the only
stupid question you have is the one you
dont ask.
Happy Trading Phil Newton

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