Dont buy breakouts on impulse-just wait and--

Gents
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Rider
read about precaution before using the strategy.

Remember
Neal Hughes is basically daytrader trading 60minute and 5 minute time frames etc. Now What about using his tactics on a long term basis specially when you trade long term on darvas box theory momentum trading?
The concept can still be applied. but you need to look at breakouts on weekly charts of the stock in question and then drop down to daily chart
to implement pullback buying as dilineated in the examples.
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If you want perfect trades, perfect your trading plan. Neal Hughes
"FibMaster
Thanks to an excellent video from NEAL-IT opens doors to new thinking.
Re-think breakout strategy.
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Generally breakout occurs and just above the breakout people place their buy orders, and short sellers place their sell orders.others have their covering orders.
So the breakout area is a high activity zone.More of a danger zone.
and by observation you will see most breakouts fail fast and the buyers get stuck. THis happens to the Darvas box theory followers more often.
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Small example
Look at what happened to breakout buyers on 29th or 30th october2006

As an example you may see the iNDIACEMENTS stock which made a breakout over 221 and reached 222+, (false breakout,then faded down all the way on 31october to 214.70

Look at what happened to clever buyers who bought after breakout failed.

BUT IF YOU LOOK AT THE PEOPLE WHO WAITED FOR THE BREAKOUT TO FAIL
they bought Indiacements at 214 to 216 rupees price.
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But we have a rescue mission here for those people failing in false breakouts.
Hint buy on pullback at fibonacci support

Want to know about it?
Why not!!!!!!!!!!!!!!!
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see the video

http://207.6.227.129:8080/lessons/Trading_Breakouts/introduction.html

http://207.6.227.129:8080/lessons/Trading_Breakouts/breakout_trading1.html


and


http://207.6.227.129:8080/lessons/Trading_Breakouts/breakout_trading2.html

what to do?

Normally over70% of breakouts fail and pullback
BECAUSE YOU HAVE FALSE BREAKOUTS.

You can filter out false breakouts using fibonacci techniques

DONT enter blindly on a breakout on impulsive thinking

Instead wait for beakout to prove itself
drop down to a lower timeframe
enter only on a pullback at a fibonacci support.

YOUR CHANCES OF FAILURE MAY GREATLY REDUCE.

rvlv
rethink your old action style!!!!!!!!!

Note
Trading Breakouts.
Breakouts can be highly rewarding, because they often indicate the start of a major move. However, most breakouts fail.
This Trader Tip will teach you how to avoid the losers, and bank the winners!

THANK YOU very very muchfor videos...

Breakout Trading as they say is not for tech newbies. Here is my humble experience about trading them :

1) Whenever prices break a imp. s/r level its a breakout. So the important thing about picking them is to judge the importance of those levels. But more important is the pattern that suggests a breakout. There are many-many patterns and each of them has a specific set of criteria. Sometimes prices survive double tops, wedges or similarly others. Thus it requires experience of reading innumerous charts. Price targets are determined from the pattern how the s/r levels are breached. Volumes are equally important. And again retracements and extension levels are very impotant, but i condider them important in all trading decisions, momentum based or after completion of a pattern.
2) Once the risk factor is conceived they are the most profitable trades. Thus if one can identify a single out of 200 stocks, they are worth the trouble,that is.

Attached are three charts. The first one is a warning how prices survived one of the highest probable pattern, an Isolated Island.
The second one give an idea about the profits IOC had given once traded on the Head & Shoulders pattern.
The third one shows a seemingly Head & Shoulders pattern near completion on Bombay Dyeing, open for criticism.
Theese are my views only, never failed me, but I may be wrong.

Regards.

Mr Lohiya,
Thanks.
Happy to see a different perspective.

My view is this.
My requirement is this.

In a day to day breakout trading, we go for buying on breakout of yesterdays high, and selling of a stock on break below yesterday low.
Now the prices cheat on us and do the exact reversals etc.
How can we find out that a certain breakout of a particular stock price is genuine and not a fake one -so that we trade on that?

shall I pick up the rising volume as a supporting thing?
shall I pick the crossing above a regular pivot level as a strong guidance?
OR SHALL I base my decision on stockhastics or roc?


rvlv

Thanks RVLV.Excellent post.

Shashank

Thanks Rvlv,
Find attech chart of reliance

Jay

I was expecting the same. Thanks Sir.

IMHO, first things first: I do not suggest in anyways trading only on breakout, I dont practise that myself. I dont suggest buying simply on breakouts of yeasterday high, and selling of a stock on break below yesterday low. Things can never be that simple in the market.

At the time of breakout the volume goes high and prices move with great force. Momentum based strategies work here.
Yes, more important is what if prices cheat on us. If the risk element is well taken care of only rewards are left.Let me elaborate.

Prices have some amount of randomness, and the amount of randomness exactly at a point of time should be judged. Say if we are about to buy, the prices have some definite probability to move up, and a definite probability to move down. A picture says more than a thousand words.
http://www.traderji.com/57594-post48.html
I had suggested a long position on NALCO since it had been under a very clear accumulation. What shall an analyst have said about the probability of moving down? 0.5? then he is not an analyst. The prices had little chances of moving down from there, say less than 0.1. The breakout did not happen at that particular time. But they did not move with countertrend either. They make noise for sometime, and then start giving me profits. And so i won.

Next consider the chart of TITAN, I have been suggesting it tens of times in the chatroom the past week. What does one judge about its probability of moving up? Open for criticism, just like BOMBAYDYEIN.

Now about the rewards. Once a breakout-trade becomes successful it is suggested to start pyramiding up as much portfolio as risk/reward allows.Even if one one breakout can be identified in a month it is worth the efforts, that is.

Now more about picking up a possible candidate for breakout. IMHO, prices and volumes are the most important thing. Everything else follows. Thats why I said pattern study is most important. I do not use stochs or MACD or MAs. I use only Bollinger Bands, that too just because they help me visualize faster and easier. Please dont ask me to give my full system for public criticism.

Sir, I cant call myself an expert. Theese are my views only.

PS: http://www.traderji.com/63003-post80.html

Regards.

Thanks for the news, Sir

Regards.

Great Post.........!!!!!!!!!


Thanks

Cheers Sir.
Please elaborate on the precaoution rider so that this lively discussion continues for our mutual benefit. All that I can gather is that it is a entry steup for the system developed by Neal Hughes.
Neal Hughes uses Dravas Box, but they are not the only criteria to find breakouts. For eg., In the thread breakouts members keep posting breakouts that fit their criteria(like I use patterns). They have a different precaution rider.
I mean to suggest that there are other strategies for breakouts too. Many have been suggested in the thread breakouts in the Technical Analysis Setion.
But I never give tips! I had given this link clearly in my earlier post, pls go through:
http://www.traderji.com/63003-post80.html
Thanks and Regards.