Monthly Archives: April 2012

Different Breakout Entry Options

If you've been around my writing for a while you know I'm not a massive fan of breakout entries. But the thing is they can offer great potential if done right. And I know that some of my readers do take them – they tell me.

Plus (and we'll keep this between you and me) from time to time one will just be screaming out for me to take it, and I may just do that.

So let's discuss breakouts.

If you're going to take breakout entries, I highly recommend you take some time to develop a set of conditions that will help you to enter the lower risk opportunities, and to avoid the higher risk ones.

One type I will always avoid is demonstrated below. Here we have a breakout in which the price swing prior to the break has travelled a significant distance already, without any pullback or pause for congestion.

My main problem with this is management of risk. Where are you going to put the stop? It's quite reasonable after such an extended run to expect some profit taking. And that, combined with any other short entry orderflow attempting to capture a breakout failure, may just be sufficient to drive price back below the breakout level.

Where will you put your stop? Maybe just below the breakout bar? That's not too bad from a "minimising risk" perspective, but from a technical perspective it's not the greatest. You'll have low risk, at the cost of greater stop outs. The only reasonable "technical" stop is the opposite side of the rectangle pattern, which is not good at all from a risk:reward perspective.

breakout entry options


The Second Greatest Trading Book in the World

For those who missed "The Greatest Trading Book – Ever!" – see here:

Ok… but what comes second?

Once again, it’s a book you’ll make yourself.

This time, you’ll use a simple notebook rather than folder. And every time you read a trading blog, or newsletter, or book, or whatever, and a comment causes a little light bulb to go on in your head… copy it down into your book. And any brilliant insight you discover yourself as you trade, test, or conduct your post-session reviews… write it down.

It’s that simple. But it makes for incredibly powerful reading, whenever you’ve got a spare minute or two.

So, here’s the first two pages from mine, to help you get started:  (with apologies to any authors who I may have got these brilliant insights from… I wish I had written down who you were, but I didn’t expect I’d ever share this.)

The first two pages:


How Can I Get More Discipline?

How Can I Get More Discipline? (Part 1 of 2)

Here is an excerpt from an email I recently received:

EMAIL (Excerpt):

… one of my biggest hurdles is still discipline. I’m beginning to think I might need some help in this area. Do you know of anyone who has successfully helped people with their discipline?



A Bias-Changing Event

We're all familiar with the charts produced by news events that cause a sudden and massive expansion in volatility, as shown below in this example from my blog archives.

(If you’re interested in the blog post associated with this chart, and an examination of the retest of support, you’ll find it in the YTC Newsletter signup bonus ebook, “The LOST Files – 150 Lost YTC Blog Posts”. Search for the following post: “Looking Inside a One Minute Bar”.)

news event changes bias

However the majority of the time a news event results in a much less dramatic outcome.

So when a news event turns out to be a bit of a non-event, should we discard it as being insignificant and simply carry on with our prior directional bias?

Not necessarily!

As seen below on the Euro, news events from last Friday and then again on Monday produced candles which would not be considered significant, when comparing their range (H-L) with prior candle ranges.