Interesting and very valid issue! In my opinion the answer is…it depends!
As a general rule, I would always wait to see a close before declaring a valid breakout, as @mtb_rex says, but that also depends on the TF one is talking about! For example, an intraday close above a line on a 4H candle is still an open price on the current Daily candle. Also, the length and shape of the candle gives some indication of how powerful the breakthrough has been…
The distance for a breakout, I think, also depends on the timeframe one is trading. If a trendline is drawn on a daily chart and stretches back a long way then a step over the line of 10-20 pips is not really very meaningful at all. But if one is trading a 5min chart then 10-20 pips is already a good move! (but trendlines on such short TFs are not really “trendlines” as such they are just the result of a lot of technical daytraders looking at the same thing and causing some intraday wobbles!
Personally, I look for context/confluence in other areas. For example, if we see a spike down through a trendline but my 1H setup is still positive with respect to my 4H then I would wait. But if my 1H was already down through my 4H setup then the spike would confirm the direction and I would look for an sell entry.
I also need a clear definition of when I am wrong, and in this situation it would be when/if the 1H setup reverses back into synch with the 4H.
But, actually, although we talk a lot about where to enter trades, in my opinion the biggest and hardest challenge, that really does determine the optimisation of our trading is when to get OUT of a trade!
Thanks for the charts. It will certainly be interesting to follow this for the next week or two.
This. I need to be better at looking at multiple timeframes to help inform my trade setup and give it more or less probability of working in my favor. Great point!
I think I’m working on equal parts entry AND exit!
We have seen a good example of this today on USDCAD! We broke through that upper channel line and even closed above it on the 4H…but the daily candle is still current and we have dropped back inside the channel:
So I got into a EURUSD trade early this morning, long @ 1.1341. Using Support and a reversal with two closed candles moving up as my signals, I entered with a 75 pip SL, and a TP of 75 pips, right below a resistance area I’ve plotted on my chart. I took this trade on the daily chart, and I’m currently up 50-60 pips, 15-25 pips away from my TP.
So my question is, as this was taken from the daily, and because my TP hasn’t been hit, what’s a newbie trader to do? My options:
Tighten the stop. Let the trade close on it’s own, with some pips gained, but not at the initial TP level
Leave the trade until the next daily candle closes and reassess.
Watch the trade like a hawk and close it if it starts moving the other way, and not get anything done for the next 30-60 min (what’s my exit criteria? Down another 1/2/5% of gains? How long do you watch?)
Take my pips now and run!
Lower TFs, the 1H and 30M are showing some battling going on. Normally I’ll peak at my trades during the day to see how it/they are doing. Some days I don’t get to check until after the US market is already sleeping.
Any thoughts appreciated. Currently, the trade is still open and I’m watching.
So an update. I closed this with 43 pips in my pocket. I was at 60 pips, came down 25% from that and decided to call it a day on this trade. Watching the bars minute by minute was not productive and definitely not helping maintain sanity.
So my to-do, research when to exit a profitable trade that hasn’t reached my TP.
Trade notes:
2672 units @1.13418
75 pip TS later changed to 45 pips at entry, then 15 pips near trade exit
Closed 1.13857
The daily still looks promising for a move back up to 1.1450-1475, where the pair has been since May/Jun.
Been watching GBP pairs as this currency is seeing some nice moves. Currently watching GBP/JPY on the daily.
It’s got a bit to go to hit a potential resistance area near 148.226. I’ll watch for the next day or two and see where we go, over or under and place my trade accordingly. Over the line, price could find new resistance at 149.21, but PP are stating 152.23. That’s a long way to go, but let’s watch. My first use of PPs.
The other side of the trade has price maybe moving down to 145.36 and then 141/142.
What do you make of it? The US markets are down today, oil is down, government will assuredly be down moving forward is we keep with the Reps/Dems battle, but the Fed is still hawkish with policy and rate hikes. Europe, I think is weighed down my Brexit and Italy budget issues that will continue into December. So lots to toss around, some conflicting issues for either currency. Potential for a break down below early November lows, or is there just too much uncertainty either way to make any reasonable assertions?
Looks like price broke below 1.13 that I marked in red above. Had I been watching this pair at 1AM, like I was GBPJPY, I could have caught some of this move down.
I’ll be watching EURUSD, GBPJPY and GBPUSD today. I’m in a short GBPUSD trade at the moment, and bagged some pips on a GBPJPY trade early this morning, which might still be good for another trade.
The last couple days have been crazy for the GBP pairs. I went against common sense and got sucked into lower time frames and got hammered for it. Since I have trades open, I’ll use Fridays (or Saturday?) as my post mortem review.
Hi journal. I’ve been away far too long, and in that time, have lost a many pips.
Today I got destroyed on my USDCAD trade, that I set up before yesterday, Thursday, before the NFP release today.
Things to take away:
Don’t set up the trade before the event release. All TA analysis was pointing in a Strong Buy. Stay away from big news events perhaps?
If I do plan to trade, maybe set up multiple trades based on what you see immediately after the release, say within 30 min.
Perhaps I shouldn’t watch the intraday, and just be content that if my SL is hit, it’s hit. Don’t try to make adjustments just because you see red. Set a trade review time at the end of the day, after US market close.
News event consensus can be completely off before the actual release, case in point, CAD jobs numbers expectations where completely off. Forecast was +11k jobs, actual came out at +94K jobs. What???
Check other market data points before the news release, perhaps futures and equities as they might shed some light on what the market is anticipating
Key point from analysis read after the fact: However, it is important to note that the US and Canadian macroeconomic data releases schedule at 1:30 GMT could make technical indicators obsolete within this session.
I’ll continue to monitor this pair throughout the day and into next week.
Where would I be EOD if the trade had been left open?
I usually trade NZD pairs on the daily. Haha. I don’t really have the time to check trades every now and then so I figured the daily chart is the way to go for me.
I’m actually still in this trade. Was at +40pips, but that’s come back a bit since I last checked. It took a week for price to move in the direction I had hoped it would. So is that bad or good that it took this long to move in the “right” direction?
Regardless, I’m still watching it. I thought about moving the stop closer, but then I might stop myself out early. So I’ll leave it where it is.
I don’t know if your still in this trade, but how I read charts shorting USD/CAD looks like a good idea on the dailies. It looks like it could could get to 1.3213 maybe even all the way down to 1.31407 or 1.31164. Those are just missed pivots, on longer term charts. the 4H looks like rough sailing and I don’t really look at anything below that. Don’t take that as advice, i’m just saying it might hit those points.
