Greetings, I am doing break out trend trading on the H1 Candle with multiple pairs. I am using a custom SMA 50 based indicator plus a breakout of the Bollinger Band @ Sigma 2 for entry signals.
I want to shrink my SL distance so that I can achieve a higher R:R. The problem with my current approach is that it does not account for marginal/temp corrections to the SMA 50 before the onset of a trend in the new direction (for the trades that win), which of course is a problem with a tighter SL.
So I am looking for any suggestions on how to spot prospective temporary price corrections; if there is likely to be one before the onset of a trend in a new direction.
Black Vertical Line = Entry time
Red Horizontal Line = Stop Loss
Green Horizontal Line = Entry Price
I can’t remember why I skipped GBPAUD; getting in on that trade would have also meant missing AUDUSD which came later, because of their correlations. In this case the outcome was favourable, but I need a definite procedure for predicting likely corrections.
Potentially I could wait to see if the market corrects before getting in as a solution, but then that would mean I might miss the breakout in cases where there is no correction
Looks like you knocked it out the park with that short position my friend. Good job.
Here is my opinion on your strategy:
Trying to “predict” corrections is probably not the way to go.
I like your idea about waiting for a correction after the breakout to enter.
Your right when you say that if you do wait for a correction to enter you will miss opportunities, but your SL will tighten and your r:r will be greatly improved.
There is no need to worry about missed opportunities because the market will always provide another.
Have you tried the same stratgey with a higher time frame by any chance?
Are there any other technical factors you consider besides the 50 SMA for determining your SL?
I just look at the MACD line crosses. Every time the lines cross, there’s some type of correction, whether it’s a small or big one. I know I’m probably saying this wrong, so if anyone can jump in and correct what I’m saying so that I’ll know how to explain it the next time then I would greatly appreciate it lol
Greetings, I have tried with D1 and the same principle seems to apply to good effect, although I am simply too impatient to trade the D1 timeframe.
Technical factors no, I wrote a very simple indicator that is just looking at the gradient of the SMA. and sends an email signal when the gradient crosses zero, i.e. when there is a turning point in the SMA 50 (new direction)
This chart is an example based on USDCAD H1. the 6 vertical lines are the most recent turning points of the SMA 50 of which 5 (black lines) would have been profitable trend trades and one (red line) would have lost - seeing as the overall trend for this pair was Bullish.
I try not to trade when the market is in correction, because it’s unclear where exactly the price will go. I think it’s better to trade when the market is volatile.
Thanks for clearing up which of the BB “climbs” you were talking about. I thought possibly that one, as the retest is clear.
I don’t know of any way to forecast “retests” on breakouts, apart to be aware that they sometimes happen. And some people use the retest as an entry position. So they miss trades which don’t retest.
Do you have any Stats on how many times out of say 10 you can expect a retest ?
