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.