I’m new to this forum, most of the time I’m just reading…
Last weeks I tested a daily break-out system, quite simple. I also want to test months in 2008 but I can’t program it automatic so I need the time to do it by myself.
Take the high and low of the previous day and wait when it reach it.
I actually want to talk about the results of the last 2 weeks because is the percentage winners enough?
Stoploss = Bollinger Band
ProfitTarget = Bolling Band x 1.5
the type of breakout observation you mention in your post is quite a common technical set-up.
previous days high-low, previous week high-low are generally smart levels to have up on your technical charts for reference purposes, especially if these levels also happen to coincide with previous area�s of strong 2 way activity.
another popular breakout set-up (on FX anyway) is the Tokyo range. Marking up a high-low from around midnight to the start of London trade (gmt clock) & playing the break, can often get you in at the inception of a decent percentage move.
as with any breakout type set-up or trigger, it�s not the fact that price penetrates the area, but how you manage your entry & control your risk that determines whether it forms part of your ongoing strategy arsenal.
obviously volatility & liquidity affect how price reacts as it approaches a level or technical hot-spot, but that�s where your trade sizing & risk management come into play.
some traders will play the breakout via a full sized position as price penetrates the level & simply take their chances on whether it pushes on initially.
others play the breakout with half or reduced size, wait for some kind of confirmation & then gradually feed their remaining stake in until full position size is in play.
an alternative option would be to wait for price to breakout, pullback & then climb aboard the pullback with either reduced size (again to test the participation) or a full sized position.
Being a momentum type play, the force of order flow which sometimes fuels breakout trades can result in an aggressive move if sufficient stop clusters and/or order tickets are lurking above or below a significant level. That can reveal itself by the way in which price action behaves on & around the area of interest.
the only way you�ll get a feel for whether this type of technical set-up fits your style is to practice it & ensure you got an each-way plan for a successful & unsuccessful outcome.
here you go, a visual example of what I’m talking bout on the current EURUSD activity.
last weeks low has been the focus of much of the continued bearish action thus far. This hourly frame perfectly highlighting the break & pullback behavior as the order flow gathers pace. Plenty of options to get aboard, scale out, scale in, compound the level etc etc.
you obviously wouldn’t be a (short-term) buyer of this pair given recent price activity, so priming your sell trigger & picking your spot on & around the premier breakout zones is a pretty decent risk play yeah?
and here’s what I was referring to bout marrying these common high-low zones with previous area’s of 2 way activity.
this zone took a little heat around 4th quarter 06/1st quarter 07. They’re worth watching as & when they get hit on next time around.
It might also be helpful if you keep tabs on the average daily & weekly range prints of your favorite pairs activity if you�re adopting this type of strategy play.
For instance, the previous months (intraday) ADR on Euro is currently 284 pips, whilst the average weekly range is printing 603 pips.
That information can be helpful when determining & calculating the possible % move over your chosen timeframe as price is either approaching or breaking out of one of your observation zones.
As an example: if you know that the average daily range on Euro is 284 pips & you open up your charts at 6.00am (London time) to find Euro has printed a 180 pip journey during Tokyo trade, & it�s aggressively approaching yesterdays high, (which is 30 pips away) then it�s already covered 74% of it�s normal activity, yeah?
You might want to compute that info into your potential profit figures if & when you take the trade on.
I�m not saying it can�t or won�t exceed it�s ADR, but it might be something you want to be aware of as price approaches & vibrates a level.
You�d be surprised the amount of times price is blanketed or contained at a level for the remainder of the day once it�s reached it�s normal average range coverage.
You could use that info to maybe book partial profits/cover your exposure/cash out & re-assess etc.
If you don’t have access to that information (fortunately we have a couple smart geeks who compile all this stuff), you could haul up an ATR indicator onto your Daily charts & plot it to 100 period which would give you a ball park figure.
Im in the process of forming a daily range breakout strategy, i hope to get feed back on what i have so far.
Ill be looking for a break of the previous day’s high/low range however only days where the close is within 10-20% of the days lows/highs will i trade. Profit targets will be the average daily range of that in the direction of the break. My stop will be placed at 50% of the adr or 50% of the range of the candle.
Trades wont be taken near or around S&R.
At the moment its all pretty much guess work. Ill be testing it in a small account over a wide range of pairs for a month or two. I think by then results will show whether its worth pursuing or not. Until then are there any suggestions or maybe things i should consider?
I think you pretty much got it down right there George. The beauty of this type of strategy play is in it’s simplicity.
What you’re essentially looking to achieve is to catch a pump into the follow thru momentum shift.
Ideal scenario would be an orderly pullback (off the highs/lows) into late New York-early Tokyo traffic followed by a surge of momentum as Frankfurt/London kicks in.
Quite often your risk/cost outlay can be very minimal in comparison to your profit potential.
We (prop desks) used to have a whole lot of fun fading these moves in the mid to late 90’s when the retail brokers activity began ramping up, but to be honest these day’s they’re a legitimate leg into a cute low risk-decent return play.
don’t ignore or overlook the previous weekly high-low markers either, especially if they match up with your entry criteria.
the 2 top gun majors (Cable & Euro) have again thrown up good grade opportunities punting with the dominant flows.
it’s your money management regime which will ramp up the % progress with this type of game play. Strong compounding when you’re the right side of the fence, disciplined cutting of the position when it washes out.
depends what your initial aims were for the trade George.
you can do whatever you want, & manage your position accordingly as long as the price action justifies it.
I don�t know which timeframe you�re looking to trigger these potential trades from, but as long as your accompanying information stacks up & you get validation from whatever criteria you observe, then you�re good to go.
there�s no right or wrong out there � only what�s right for you!
Tess will sometimes compound an intraday (Tokyo range) breakout several times if she gets the opportunities, regardless of whether the original intention was for a specific day trade or not.
you don�t always need to be thinking in terms of running trades across several days or weeks to add to a position. If sufficient justification exists, then you can compound a trade every 20 or 30 pips up to it�s ADR if you�re so inclined & the price action dictates.
Good to see both of you still hanging around and offering valuable advise to newbies like us.
I have a few questions on breakout.
1)I uses MT4 as my charting platform. How do I define Asian high low in MT4? I can’t figure out what timezone does MT4 uses? EST, GMT?
2)Jocelyn mentioned that we must take notice of the average daily range. For average daily range, do you consider the range which starts from the Tokyo session until end of NY session or each indivudal trading session?
3)For example, average daily range on Euro is 284 pips & you open up your charts at 6.00am (London time) to find Euro has printed a 180 pip journey during Tokyo trade, & it�s aggressively approaching yesterdays high, (which is 30 pips away) then it�s already covered 74% of it�s normal activity. Does that mean Euro will less likely to break yesterday high after covering 74% of it’s normal activity?
4)Jocelyn, you mentioned using the ATR indicator to help us with the average daily range, how do I read it after haivng it on my chart?
I usually define the Tokyo range as midnight to approx 8.00am (London zone). It�s a ball-park reference, don�t get too caught up with actual to-the-minute time limits. Frankfurt comes on line at around 7.00am London, & occasionally prices can take a lift if sufficient volumes are being worked thru the order books early doors.
I tend to focus more on where prices are at as London opens it�s doors & then see where price is at in relation to the overnight activity.
Yes, the session range parameters are worked from the Tokyo open thru to New York closing prints.
The range statistics are simply another item of relevant information we utilize to assist in our (technical) strategy planning endeavors. They�re not set in stone, in that prices will travel according to the participation & strength of the order flow. The figures are simply another piece of the jigsaw in helping to identify the potential of a move playing out at particular times of the day.
Unfortunately I can’t make out the details on your chart example Ray, it’s a little fuzzy, but it shoukd read something like 0.0273?
if so, then you’re looking at an avg daily range of 273 over the plotted period.
We’ve got a reading of c260 for the average of the last months worth of EURUSD activity, so we’re more or less on the same page!
I’ll haul up an example of todays action to help explain how we look at it.
Here’s a 15min view of yesterdays H-L markers & todays Tokyo range play.
You can see that there’s barely 30 odd pips difference between y’days high & the overnight high, yeah?
You need to be mindful of this type of activity if you get a couple of significant levels overlapping - it’s best to group them together & use the major one as your default marker.
Price has rejected y’days high & is flopping around inside the range going no-where fast. The current ADR is printing c260 & there’s plenty of upside room should it decide to make a run thru the top…conversely there’s also quite a way for it to trek to the downside (off todays high) if momentum catches an aggressive push.
Being aware of the key levels & the pairs average momentum journey can help to position your triggers/set-ups accordingly if you decide to execute a low risk trade, be it a breakout opportunity or maybe a reversal play off a key level such as this move away from yesterdays high?
Here’s a clearer view via the 5 minute frame of today’s activity.
It seems that Tess, Jimmy and Jocelyn took notice of the weekly , monthly and daily ATR, I wonder how does the weekly and monthly ATR help you ppl in trading? I thought we only took notice of the daily ATR.
I always like to wait for a pullback before attempting any breakout trades and it has always work for me. Recently I am looking into blind breakout whereby I entered when price breached my zones of interest. I always place a pending order beyond my zones of interest and wait for price to hit it. I feel this type of breakout play is more risky compared to an ideal pullback setup.
basically the same goes for the weekly and monthly, if you plot a line on your chart where the previous weeks and monthly high and low points were, then that is going to be a point of action when price revisits and looks to breakout. thats what i think they mean anyway.
[B]trav[/B] has it right.
we use the weekly high-low extremes in much the same way as the intraday high-low markers. They�re merely guide posts.
if the price action (& accompanying fundamental info) validates a level then we�ll get to work on either a fresh entry, add-in to an existing position or look to those same levels (& the reactionary behavior on & around them) to trim out of a position and/or close it out.
the average daily & weekly range prints assist us in determining whether sufficient value exists to take on a new position or add to an existing position at a particular time of the day.
for instance; if we know that the current average daily range of the Euro is say 250 pips & we�re long from a Tokyo range breakout at 7.45am then we�ll use that info as part of our decision making process when we�re evaluating the deal throughout the day.
so, if price has travelled 220 pips as NY gets underway & we get a potential (technical) reversal set-up, we�d maybe look to trim a little profit out of the deal or certainly consider rolling our stops up to protect profits.
that kind of information offers us options. It�s also based on actual & rolling price adjusted movement, which keeps it as honest as possible to the current flows back & forth thru the various levels.
if that�s the key to how you play a breakout set-up & you�re comfortable with it, then don�t change your tack. As long it affords you value, whilst controlling risk then you�ve covered your bases.
there�s no right or wrong way to play any type of technical set-up�…only your way!
if it puts $$�s in your account on a consistent basis & it doesn�t compromise your risk model, then you�re good to go.
As Jimmy commented, we use the assembled data as markers or guides to assist in analysing & planning potential trade set-ups, compounding/profit taking steps & just general price awareness.
Quite often, the weekly high-low levels coincide with highly visible swing zones. Previous days high-low levels are often indications of potential (near-term) support & resistance reaction zones.
They are popular area�s of stop order activity up & down the ladder, especially if they coincide with a slightly longer range support-resistance zone.
Weekly & daily average range figures offer us options & choices when price approaches their respective % levels.
Here�s an hourly snapshot of the current months price activity, showing last weeks high-low markers & the current technical trend. At present it looks like we might be heading for an inside week as price gets pushed around off it�s major lower high swing peaks.
All the relevant data is there in simple form to draw attention to the current vicinity & potential journey of the price action.
The intraday picture offers a similar view of the closer range footprint. You got the respective levels clearly annotated & depending on your preferred game plan, you can wait & adjudge whether a particular opportunity offers sufficient risk to value cost for you to take a trade on.
Note the average days range (248)��…Euro has travelled 246 pips from today�s high @ c1.3177 in early New York trade, to the current NY low @ c1.2931.
So, if you were seeking a shorting opportunity in line with current fundamental & technical positioning, this info could well have assisted you to confidently control your position management throughout the price process.
Today London session is so slow could be due to end of month. Price is just bouncing around the Tokyo low and previous day low. Hope things will get active.
Hi Jimmy,
I missed the trade you described as I was off my screen. But I took a long off cable when price retested tokyo low and bounce off tokyo low. it is always good to see that the levels you had on your chart are visible on my chart too. By the way how do you posted your chart and make it so clear? Imageshack seem to load very slow with babypips and I can’t seem to find the correct size with tinypics.
some of the guys here use a program called SnagIt to capture scrolling images, video & graphs. It’s easier to match the size to the particular host you’re intending to use it with.
I simply then transfer the SnagIt image from my document files across to TinyPic.
