I am using a revised setup for breakout trades which in essence is a double-bluff on a false breakout. In the chart below, the usual setup would be to enter on a break of the resistance level indicated by the horizontal blue line, and with a stop-loss below the recent low, indicated by the orange segment. The double bluff setup places the entry at the stop-level i.e. I enter where other people have there stops (and where I would usually get stopped out!). My stop was placed at the price level indicated by the red line segment, which gives me a safe level to let the trade run as a swing trade:
Here is the price action that immediately followed the breakout:
Increasingly I am seeing breakouts produce a deep pull-back before resuming in the original direction of the break. This double-bluff provides a safer way of getting into the trade.
As I mentioned, the stop was set so that I could run a swing trade over a period of days. As it turned out, the trade ran for a couple of weeks, until the end of the year:
A nice way to end the year!
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