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Which breakouts are the best breakouts to trade

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Is there anything better than finding free money?

Just now I was looking in my records for one of the intensive mentorship course guys to see if I had an old interactive brokers paper trading account.

I log in to check that it works, and it’s NOT a paper trading account… it actually has $12,775 in it.

Hey not much, but better than a poke in the eye with a sharp stick, right?

 

 

So anyways, I’d like to see if I can turn this crappy little account into something meaningful, using the 4hr system which I’ve been neglecting of late. I’ll set up a spreadsheet for it today, and share it so you guys can follow along with the results.

Of course small accounts are extremely limited in what they can do for margin reasons, and I have to bend the rules of sensible trading… but what the hell.

I’d like to show you something interesting about breakouts today.

Breakouts from trading ranges are a difficult way to trade, because most breakouts fail.

Of the ones that work, most of them chop around or retest the breakout point for a while, faking traders with tight stops out of their positions and suckering mean reversion traders into a bad bet.

The important thing about trading breakouts is that its ALL ABOUT THAT CLOSE, BABY. A touch of the range high means nothing, but a close above the high is significant.

Why? Because the top of the trading range is the perfect place to short. If the buyers have enough power to close above the perfect selling point, those traders who just shorted will be forced to cover.

Recently we have a close above the old range highs in Silver.

 

Look at the powerful move once the shorts are forced to cover. One thing to notice is that a strong move like this with only single bar and intrabar pullbacks is a very strong probability of having a second leg up. This is exactly the type of kickoff which starts a strong trending period.

 

Now look again at the above chart and see if you spotted the clue before the breakout?

 

If you want to know more about the subtle clues that always happen right before breakouts, then you really should check out the Price Action Masterclass. It has everything I know about reading charts bar by bar.

Check it out HERE

Have a great day

Scott

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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