The reason why I have stopped (day-)trading breakouts

I am trading since April 2021, which means I am closing in on the 3 year mark. During most of this time I have traded some sorts of breakouts. Every strategy somewhat speculated on the continuation of a recent move on my chosen timeframe.

I had very good returns with it in times of high volatility. Problem for me was to keep my profits when price action slowed down. And with more and more hours in front of the charts I realized that slow price action is very common, at least in the market I specialized on (DAX).

For every day that price travels a long way up or down, there are several days when price just produces an overlapping mess on the daily chart.

The problem with my breakout strategies was that they allowed me to trade everyday. As a breakout trader you can find a setup on most days. The only exception is a very narrow range day, where price doesn’t peak over or under the range high/low and this is very rare. It is rare because the market is fishing for this retail breakout traders, who buy above an old high and vice versa.

I started following a very good retail trader, who is transparent and profitable. He trades breakouts, too. Not only, but most of his trade are breakout trades. And I analyzed his trading and found out, that the only reason that this guy is profitable is, because he adds to his winners and makes very big profits on few trades. Those profits are big enough to compensate him for those times where breakout trades don’t work out.

I can’t copy that (yet). I am not mentally suited to go 300% in a trade. The solution for me was to specialize on those times of low price action. Because during those periods I found, that price reacts very, very precise on major support and resistance. Now I buy where I would sell as a breakout trader and speculate on a reaction that stops breakout traders out or at least gives me the opportunity to reduce my risk on the trade.

The biggest advantage of this is for me, that I don’t have a setup everyday. If price doesn’t test my support or resistance lines, I stay out. If price just rallies like today, I stay out:

I am losing less since I adopted this trading style. Last year I would have gone long and made good profit. But days like this are not common and most of the times price triggers your breakout order, stops you out and then goes in your favor.

What do you think? Have you made the observation too, that it would benefit you more when you just buy support and sell resistance?

If you like to see if I fail again or not, you can follow me and my inner thoughts in my trading journal here on babypips.


Hi - this is a great summary of your trading results over a long enough period to show that you have not managed to establish an edge. I have personally experienced that back in 2010 and again around 2015. Probably like me, you maintained sufficient statistical evidence that showed you were still in net loss taking into account all your trades. My first experience was over around 300 trades. My second experience was over around 800 trades. In 2020, I had a chance conversation with a trading friend of my younger son that changed my trading life forever. The subject was crypto. Like my approach to Forex, I first allocated a bank that I was comfortable to lose 100%. I just then followed the market. What fascinated me about crypto, and still does, is that it is like Forex on speed. And it is purely about volatility. Over the past 3 and a half years, I have experienced a 20X, a 5X on two minor trades, and I have experienced a 98% loss on a crypto that I locked myself into and could not get out of. That was by far the biggest loss I suffered in my entire trading history, but because that component grew from 5% of allocation to over 50% allocation inside four months, it was not nearly as devastating as it could have been. My plans told me to ladder out, but my greed told me to hold on. A bit complicated because it was not like Forex. It involved components of NFTs and DeFi trading with short term APR rates of thousands of percent. You live and learn. Despite all the volatility, my crypto portfolio is up 120% over the 3 1/2 years and I have now separated it out into “low risk” and “high risk”. Whilst most folks run a mile when you mention crypto, my 2024 plan is based on BTC and ETH continuing to grow, and later in the year, the alt coins being the destination of all that profit newcomers will have made if they had their BTC and ETH allocations last year.

Third time around for me, so never give up. What motivates me to diversify my investment and trading is when I remind myself that if you sit on cash, you are automatically losing about 7% of its value every year due to the hidden stealth tax of inflation. The last 3 years has been very disruptive for most countries, but I maintain if you don’t continuously look for new opportunities, you will be a dead duck on the shooting range of the big bankers and hedge fund traders.

Best of luck whatever you decide to plan for 2024.