Confirming A Breakout

“Even so, humans generally have little choice but to base their plans on assumptions about the future. For example, you plan tomorrow’s activities assuming that the sun will rise and that you will still be alive. The first assumption is well-founded; the second is less certain.”

Hello:

The last two weeks had been so difficult for most traders. The movements of the markets were indecisive. Even short-term traders faced serious challenges. The markets generally moved in ranges, with common false breakouts. This experience was a blessing in disguise. Why? The reason is that versatile and adroit market speculators have come out with better trading plans. Once you understand why your bad trades happen, you’ll make yourself a better trader. The only regrettable thing is an instance in which people fail to learn simple lessons and make the same mistakes. Many people will continue dwelling on illusion even if realities often prove them wrong. Some traders will continue to lose again and again, while some will continue to place better trades. I’m a private teacher of academic subjects with over 10 years of experience. I’ve taught some students who improved academically in the long or short run. I’ve also taught some students who didn’t improved at all, even after years of teaching. Although there are many factors responsible for this, the most significant are obedience to simple instructions and burning passion for knowledge in the individual student – things that most students who didn’t improve over the time lacked

On bad markets, you need to fight hard to preserve your trading capital for those periods when you can gain so much. Like I said in my past articles, it’s very important to know when the markets are favorable to a particular strategy. We should never close big losses during losing streaks. Instead, we should close big profits during winning streaks.  The best way to survive bad markets is to stay out of the markets when it’s evident that the conditions aren’t good. Why should you suffer many losses in a row? As for us, three losses in a row are enough confirmation of an ongoing bad market; and we’ll stop trading for the week. We’ll make sure that our maximum drawdown on weekly basis is 2% – 3% (only in a worse-case scenario). As long as there aren’t three losses in a row, we’ll continue trading. It’s as simple as that.

Peter Milman emphasizes that there’s no science in trading. Nothing is ever guaranteed but if you can find just one setup that works consistently for you, stick to it. Patience, patience, patience. It’s a game of patience.

Confirming A Breakout

Going back to the topic above, how can we confirm a genuine breakout? Confirmation is necessary since it’s terrible to get trapped in bad positions. Now here’s a straightforward answer: You must have a close that moves beyond the high of a breakout bar if prices are moving up and a close beyond the low of the breakout bar if prices are moving down. If these requirements are met, then you probably have confirmed a breakout (violation). Otherwise, what you’re seeing is nothing more than stop running. This is especially important in keeping you from trading a false breakout, when using the lines of support or resistance, or a trendline.

When it comes to trading, you just need to set reasonable goals, have modest expectations… and go on and execute your plans.

I couldn’t help posting here some words of encouragement from Sam Seiden:

“Trading is a difficult challenge that will test your emotions more than you can imagine. From birth, we gravitate towards things that make us feel good and run from things we fear. If you take this instinctual and conditioned action in trading, you will lose. For example, if you wait for news and charts to look “good” before you buy into a market, price is already high and at retail prices at that point. You can’t buy when price is at retail levels and profit consistently. If you sell into markets when everything including news, indicators, and opinions are “bad,” you are selling when price is low and at wholesale levels, which is the last thing you want to do. The goal is to buy low and sell high. You must understand that proper trading is not easy on the emotional side and you don’t want it to be. If it were easy, everybody would be doing it and making money, but that is just not the case. The people who do well over time are the ones who understand that the path of learning and practicing takes time and is typically a bumpy road. The key difference between those who fail and those who stick it out and succeed is that the successful ones embrace the bumps in the road with a positive attitude. They realize that the bumps are needed failures that allow them to grow. You see, when you experience failure, it is really success letting you know that you have identified a flaw that needs to be corrected or removed, and that’s a great thing.”

Your questions and opinions are highly welcome.

Thank you.

With best regards,

Azeez Mustapha

Forex Signals Strategist, Funds Manager &Coach

Email: amustapha@fxinstructor.com

NB: There is risk of loss in trading, but it is possible to be a successful trader.

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