TradersClass

Superior Trading Skills through Education

 
Trading False Breaks Print
Written by Site admin   

Non Farm Payroll, NFP days, are well known for surprises and violent whipsaws.

False break outs are either the bain of the Forex traders life or one of the best trading opportunities available. I go with the latter view, I'm seldom comfortable with breakouts as there is a very high probability of false breaks so I like to be on the look out for failing breakouts as the probability of a move against the previous trend is higher.

Trader Vic, Victor Sperendeo, detailed the 2B false break in his 1991 book 'Trader Vic, Methods of a Wall Street Master' Take a look at the picture below.

This is how to trade them, see the chart and desciption below....

1. Draw a horizontal line at the most immediate high (or low) that is followed by at least one corrective candle that didn't go higher (lower). 2. The candle that makes the next new break out high is marked up with a horizontal line at its lowest point (high). 3. If price now comes back, I want to be selling when the next candle moves lower. Manage the trade in the usual way with scaling out to ensure a profit doesn't become a loss.

 

From the blog

How to be a professional trader

How to be a professional trader

The world we inhabit is dominated by the 80-20 principle.

Vilfredo Pareto changed the way we looked at many things, specifically micro-economics which he linked to social factors which went on to become popularised in recent years. Pareto observed the "law of the vital few". Approximately 80% of the effects come from 20% of the causes.

Nowhere is this more apparent than a glance at the small print at the bottom of every spreading betting website. They are now required to publish how many clients lose - you guessed it, around 80% of their customers lose money.

So, what of the remaining 20% or so?

There are is no shortage of horror stories from the 80%. Many have been there. This article describes the spiral into despair which results from marketing hype and personal hubris, the Superman effect, following modest successes. 

Reality? A recent research report from Psyquation indicated that fewer than 20% become profitable after two years and only 1.2% are successful enough to make trading their career. Sobering stuff for those new to the game, but is it gambling? Thanks go to long term investor Gary Scott for the article below:

Trading and Investing is gambling.

Until we admit this, we cannot invest like the pros. However, once we recognize that every investment is a bet, can we become a professional investor instead of a stock and bond gambler?
The fact is professional gamblers are not really gamblers. They are investing pros who cash in on the imbalances of gamblers. They invest in bets instead of stocks and bonds.

Read more...

Check these links

  • JoomlaWorks Simple Image Rotator