Breakout trading is one of the simplest day trading set-ups to understand. The first hour of the trading day is the most volatile. Bears and bulls are battling it out in the stock market, trying to show you who’s going to be the boss for the day. This volatility creates a price-range you can trade from. Like all breakout trading set-ups, this is a great set-up because it offers a very low risk entry.
How to trade breakouts?
Breakout trading system is a well known concept. It is a variation of the classic N-bar breakout system. This concept is so widely talked about because it works. I will show you a new twist of the concept that is never discussed anywhere else.
What does the breakout trading system do?
1. It identifies the highest price and lowest price reached since open upto the Start Time and also takes into consideration the range of the previous day.
2. Long on a stop at the desired percentage and short on a stop at the desired percentage obtained in #1.
3. Only trade once per direction, so at most 1 long and 1 short positions taken per day.
4. Always exit at the end time of the day.
5. When the range of previous trading session is above certain threshold of the average range of the previous trading days, no trade is taken for the day.
Here is the trading system, Breakout Trading. You enter high and low of previous trading session as well as enter high and low of current session. You enter the desired percentage of stop and profit target and voila, the system automatically calculates the entry price, target and stop loss for you. The system is written in formula and can be used for any stock, index, commodity or forex with proper liquidity. Traders and investors have always dreamed of magical formulas or Holy Grails to make huge profits. There is no such system in this universe, however experience may make one as a perfect trader.
6. You can see a person who can slip and fell down even he walks inside his home safely; in the same time another person balances his weight and walk on the rope tied between two buildings. Day Traders are like the man who walks on the rope. For every achievement there are certain rules. Learn the Rules; never break your Own Rules. Be an achiever whatever the strategy you use. All the Best.
7. More information on the Breakout trading system or strategies has been posted on our BLOG section.
Breakout framework is a well known idea. It is a variety of the exemplary N-bar breakout framework. This idea is so broadly discussed in light of the fact that it meets expectations. I have demonstrated to you another spot of the idea that is never talked about anyplace else.
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