How do you determine a breakout from a false breakout?

[Blaze]

I would like to know how one can determine if the breakout is legit or false. I have been caught plenty of times buying a false breakout just to be stopped out seconds after my entry.

Is there a way to know before hand if the breakout will be valid? I would also like to know trading strategies to play breakouts.

Thank you

[Lisa]

	Quote:	Blaze
	I would like to know how one can determine if the breakout is legit or false. I have been caught plenty of times buying a false breakout just to be stopped out seconds after my entry. Is there a way to know before hand if the breakout will be valid? I would also like to know trading strategies to play breakouts. Thank you

You can try using Bollinger Bands. When they become narrow, there is a chance price will breakout in either direction.

Also the NR7 tactic. If the price range is minimum for the last 7 days, the breakout is likely to be real.

[fivedeez]

	Quote:	Blaze
	I would like to know how one can determine if the breakout is legit or false. I have been caught plenty of times buying a false breakout just to be stopped out seconds after my entry. Is there a way to know before hand if the breakout will be valid? I would also like to know trading strategies to play breakouts. Thank you

I had a similar problem playing breakouts so I stopped playing them. Try timing your entries on the pullbacks instead. It is a more conservative approach but less riskier.

Many time the low or high will be taken out by a few points just to reverse. I think alot of newbies will get caught in this move. They like to short new lows. However, you need to give it a little room (few ticks) to determine whether the breakout is valid or not.

Good luck

[Soultrader]

I will usually wait for a pullback when playing breakouts. Most of my breakouts are done around pivot points and value area. I do have one exception: I have found the TRIN range breakout to be one of the most powerful breakout setups.

Find the range of the TRIN during the morning session. If in the afternoon session the TRIN makes a new high or low, this can act as a leading signal for price to breakout. Remember the TRIN and price have a inverse relationship. If TRIN makes new highs, look to short price. If TRN makes new lows, look for a long setup. I find this setup to work particularily well in the late afternoon session.

[Bull run]

	Quote:	Soultrader
	I will usually wait for a pullback when playing breakouts. Most of my breakouts are done around pivot points and value area. I do have one exception: I have found the TRIN range breakout to be one of the most powerful breakout setups. Find the range of the TRIN during the morning session. If in the afternoon session the TRIN makes a new high or low, this can act as a leading signal for price to breakout. Remember the TRIN and price have a inverse relationship. If TRIN makes new highs, look to short price. If TRN makes new lows, look for a long setup. I find this setup to work particularily well in the late afternoon session.

Do you know if this strategy will work with equities as well? From my understanding you trade only futures?

[Soultrader]

I would say I trade 90% futures, 10% stocks.

I don't see why the TRIN breakout would not work for stocks. I suggest testing this out first. I use this strategy for futures only.

One similar strategy you can use for equities is TICK range breakouts. I know many stock traders who use this strategy. Anytime you have the TICK stuck in a 2 hour range, watch for new TICK highs or lows. The setup is to go with the TICK breakout.

[Bull run]

Interesting. I will try that out. Thank Soultrader.

[Soultrader]

	Quote:	Bull run
	Interesting. I will try that out. Thank Soultrader.

Your welcome

[Blaze]

Wow good stuff here. Lisa, what exactly is a NR7?

[Lisa]

	Quote:	Blaze
	Wow good stuff here. Lisa, what exactly is a NR7?

Here's the link for the trading terms.

http://www.traderslaboratory.com/for...c.html#post101