So you did your EOD analysis and zeroed in a couple of Stocks where the price-volume action suggested that price is likely to break out of a range or has seemingly broken out of range and you decide to take position in the stock first thing in the morning.
And as the fresh trading session starts you take a trade mostly on "market order" as you donot want to miss the breakout. (FOMO).
But,then you start wondering ----
Why price is not moving in my desired direction?
Was my analysis wrong??
Is this EOD analysis a sheer waste of time???
Are people who say Technical analysis doesnot work,correct????
Or is it my bad luck--- may be these markets donot suit me ?????
And with all the above thoughts clouding your mind,you see the price drifting down,below the day's pivot/S1/S2 or at times previous day's low --- and with very heavy heart, you take a deep breath,and cut your positon,booking loss and wondering what went wrong.
Worse happens,when you notice the same stock having gone up more that 10% in next couple of days. It again draws you to markets, to commit the same mistake again.
Let me illustrate the above with a Couple of recent examples:
BEFORE
AFTER
The most popular advice that one gets to counter the above scenario is "Instead of trading the break-out,trade the retest of the break-out as most of the time,the break-out point gets revisited"
The problem with the above advice is that when price is revisiting the break-out point,it mostly looks like a falling knife and one wonders whether to catch it or not. Although there are methods to look at the volume at the time of revisit and formation of reversal candlestick patterns at the time of revisit,but currently our issue is whether we can handle the break-out trade in a better way or not.
First of all, check the move from where the break-out move got started,use it for your position sizing and Stop-loss.
Second, and more important point (particularly when you wish to trade the break-out Intraday and not on short term positional basis), is using first 15 minutes candle on the day of purported break-out. In two of the three examples above, the first 15 minutes candle was enough to tell that the break-out is not happening. And in the third, the fake break-out could be told within first few candles.
Summing up :
Step-1 : Identify the proper stop-loss point,depending upon nature of trade (Intraday/short term position).
Step-2: Based upon Stoploss, decide upon the position size.
Step-3: Make proper use of 15min Opening Range Break-out to initiate the trade. All intraday traders have to see the break-out trade as an ORB trade only.
Approaching the break-out trades with abovementioned steps will not only prevent you from rushing into the trade but also help you to plan your trade better.
And as the fresh trading session starts you take a trade mostly on "market order" as you donot want to miss the breakout. (FOMO).
But,then you start wondering ----
Why price is not moving in my desired direction?
Was my analysis wrong??
Is this EOD analysis a sheer waste of time???
Are people who say Technical analysis doesnot work,correct????
Or is it my bad luck--- may be these markets donot suit me ?????
And with all the above thoughts clouding your mind,you see the price drifting down,below the day's pivot/S1/S2 or at times previous day's low --- and with very heavy heart, you take a deep breath,and cut your positon,booking loss and wondering what went wrong.
Worse happens,when you notice the same stock having gone up more that 10% in next couple of days. It again draws you to markets, to commit the same mistake again.
Let me illustrate the above with a Couple of recent examples:
BEFORE
AFTER
BEFORE
AFTER
BEFORE
AFTER
The most popular advice that one gets to counter the above scenario is "Instead of trading the break-out,trade the retest of the break-out as most of the time,the break-out point gets revisited"
The problem with the above advice is that when price is revisiting the break-out point,it mostly looks like a falling knife and one wonders whether to catch it or not. Although there are methods to look at the volume at the time of revisit and formation of reversal candlestick patterns at the time of revisit,but currently our issue is whether we can handle the break-out trade in a better way or not.
First of all, check the move from where the break-out move got started,use it for your position sizing and Stop-loss.
Second, and more important point (particularly when you wish to trade the break-out Intraday and not on short term positional basis), is using first 15 minutes candle on the day of purported break-out. In two of the three examples above, the first 15 minutes candle was enough to tell that the break-out is not happening. And in the third, the fake break-out could be told within first few candles.
Summing up :
Step-1 : Identify the proper stop-loss point,depending upon nature of trade (Intraday/short term position).
Step-2: Based upon Stoploss, decide upon the position size.
Step-3: Make proper use of 15min Opening Range Break-out to initiate the trade. All intraday traders have to see the break-out trade as an ORB trade only.
Approaching the break-out trades with abovementioned steps will not only prevent you from rushing into the trade but also help you to plan your trade better.
