This is a chart of the 5-min EUR/USD during the NY session. The green line is where I entered, the red line is my stop, and the blue line is the target. Obviously, this is a scalp, but did you notice where I entered?
Yes, there are four consecutive bull bars breaking out, but you can hardly call them strong. One has a tail, followed by a tiny doji. This is what is dubbed “an ugly breakout.” So why did I take it?
I believe that to make money, a trader needs to trade. Looking for perfect setups that very rarely exist is a waste of time. Instead, I look for strength that turns into momentum. Now I concede there are better breakouts than this, for example:
This is the 1-min chart of the USD/CAD. As you can see, I entered really early. There is a trick to knowing if the probability is high of a successful breakout. Here, my instincts were correct (this time). Still, I was prepared mentally to get out quickly if price reversed at resistance.
I know most traders are taught to wait for a pullback to new support before entering. However, I think that is a mistake. If I had not gotten in when I did, I would certainly get in now. This is what happened:
If you wait for a pullback, it may wind up being a full-on reversal as this was setting up to be. I got out here having to settle for another TP short of target. That happens a lot in the NY session as the markets consolidate.
As always, I appreciate respectful comments and questions.
There is much more to trading than what you are describing.
You only have 1 piece of the puzzle: the strategy: (your) strategy is to trade breakouts without waiting for a pullback when your “instinct” tells you. That’s OK if it works for you. Just keep track of your trades, and see if you are consistent in the long run.
Other pieces of the puzzle I would recommend is for you to have a clear trade management plan. Maybe you already have it, but it’s just as important as the strategy… Position sizing… risk management… Partial/Full take profits and stop losses…
Personally I don’t believe in instincts… certainly the more time you spend on the charts, the more you pull the trigger, when you see a setup you “like”, but this is a dangerous business, coz you can just wake up “off foot” one day, or be a victim of revenge trading. When you see a trade of yours fail, many times, you consider this to be an opposite signal, so you close your buy and open a sell.
I think when you truly master the markets, you will be able to set certain rules that you could give to someone else, and make him profitable in the long run. Also when you have rules, you will not trade, unless market meets your rules (no more revenge trading).
On a nutshell, the only advice I can give you: Try to understand why you like some breakouts, and not others. Is it the session time?, is it the candle formation?, is it some patterns just at Support or resistance, is there any “liquidity grab”; is it a range you see until your target? RULES RULES RULES!
I do. But that goes outside of the scope of what I was conveying here in this post, which was purely technical. I did not want to make readers sit through War and Peace, as some have already read the book
I get that, but at some point, trading becomes intuitive, giving humans a slight edge over computer algorithms.
I respectfully disagree. You cannot give any other trader anything. They have to discover it on their own.
Going into why I trade some breakouts while leaving others alone:
I am looking for consolidated basing structures at support or resistance
Or
I am looking for strength followed by momentum that is different than what has been displayed in the range thus far.
I trade during the NY overlap, so I am looking for early reversals or breakouts around 1400 GMT, or right at the time when Londoners are taking profit.
So, all though I am very flexible in my trading, I do have rules set up specifically for me. However, they may not work well for another trader.
