During the CFRN Partners Meeting news from the Euro Summit pushed the S&P 500 Emini Futures up 20 points on 40k contracts. During RTH (regular trading hours) 40k contracts might move the Index 2 ticks at best. This is a prime example of why:
- You must always have a hard stop
- You must always be aware of global economic events
- You must accept the fact that you never know when "news will hit the fan"
Every trade you place - no matter how humble, no matter how quiet the market, must come with a full-blown emergency preparedness plan. As long as you trade with a disaster plan in place, the chance of actually experiencing one, is greatly reduced. Without one, your trading plan and ultimately your business plan, becomes nothing more than a ticking time bomb.
S&P 500 Emini Futures
(ES) Emini Rally on EU Summit News
Emini Breakout Kings
Breakout trading is one of the most basic trading strategies. The term Breakout tends to make us think of an up move but a down move or a Breakdown, also falls under the definition of Breakout Trading Strategies.
The most basic definition of a Breakout is that after a period of consolidation price moves either above or below a well defined support or resistance level. Traditional TA (technical analysis) says that the break must be accompanied by high volume for validation. On the chart above we showed the market moving 20 points on very light volume in a thin market on big news. So while the Breakout Trade is simple in concept, there are some complexities that should be understood.
#1) Price may expend a great amount of energy to finally break through Support or Resistance.
#2) After expending great energy, price will often retrace its steps triggering the stops of those who entered the trade based simply on the breakout without any follow through confirmation.
#3) Those stops being triggered can then propel price higher or lower depending on the direction of the breakout. This should not be confused with the "They ran the stops" conspiracy. What I am explaining does not involve a "they", it is an explanation of how markets work.
Breakouts can be traded on a 1 minute chart or a monthly chart. The concept is the same, the only difference is the risk required and the potential profit to be gained. When watching a daily chart, price might spend days or even weeks attempting to break out of a range. Once it breaks, if you place your trade without any additional confirmation you become what we call a One Eyed Jack.
How To Be An Emini King
In A Land Of One Eyed Jacks
The difference between a Breakout and a Fakeout is - Confirmation
Top 2 Breakout Strategies
- Confirmed breakout
- Failed breakout
Now here's the top-secret breakout strategy you won't find anywhere else.
ALL BREAK OUTS ARE TRADABLE OPPORTUNITIES
The key to a successful breakout strategy is learning YOU CAN PROFIT no matter what happens. First, accept the fact that 50% OF ALL BREAK OUTS FAIL. Revel in it. This "secret" removes all bias and gives you a clear head. The knowledge simply makes you informed, embracing it makes you a King.
Forget about the outcome of the break, simply trade whatever confirms.
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