# Breakout and Pullback Risk/Reward



## pavilion103 (11 May 2011)

I have spent a lot of my time recently learning about breakouts. One problem I have had is not enough high multiple R wins. I realise this can be due to poor entry/too tight stop etc.

I have a question about pullbacks. I haven't studied them in great detail but it would appear that they seem to offer greater reward/risk. It allows me to place my stop tighter and achieve larger multiple of R wins (but obviously a higher number of losses too). *Is this generally the case?*

Depending on the breakout, I have waited to see if some will pullback and either enter on a low volume pullback or set a new buy entry a tick or two above the high of the breakout bar (see below  - I have entered (in my simulator) on the second last bar, the one that broke the green line). 





I am looking to trade both breakouts and pullbacks.


----------



## Boggo (11 May 2011)

*Re: Beakout and Pullback Risk/Reward*



pavilion103 said:


> I have a question about pullbacks. I haven't studied them in great detail but it would appear that they seem to offer greater reward/risk. It allows me to place my stop tighter and achieve larger multiple of R wins (but obviously a higher number of losses too).




"Pullbacks" is an interesting term. I look for stocks that are on an uptrend, look at where that stock may be in its 'pattern cycle' and then wait for the correction (pullback ?) before entering.
There are levels where a stock may pullback to and this happens more often than most realise on stocks that are in a steady upward trend.
The stop loss point is clearly defined too in these situations.

Two current examples of what I mean below (the software I have used here does the calcs and provides a min target based on the previous pattern but you can do it without that when you know what you are looking for).

(click to expand)


----------



## tech/a (11 May 2011)

*Re: Beakout and Pullback Risk/Reward*



Boggo said:


> "Pullbacks" is an interesting term. I look for stocks that are on an uptrend, look at where that stock may be in its 'pattern cycle' and then wait for the correction (pullback ?) before entering.
> There are levels where a stock may pullback to and this happens more often than most realise on stocks that are in a steady upward trend.
> The stop loss point is clearly defined too in these situations.
> 
> ...




Great topic you come up with some meaty stuff Pav.
The first real student in tech analysis Ive seen on here.

Firstly a couple of things again strapped for time.

(1) Expectancy should be the result of a great number of trades not an expectation of what youll gain if a trade stop placement and exit is executed as planned.
(2) The formula you use for Breakouts can easily be adapted for Pullbacks by turning it into an alert I'm sure I gave you the code.
(3) There are lots of ways to skew your R/R.
My stop is never set in stone---(On the Stop side) I will and often do *RAISE IT *to meet a falling price.(On the exit side) I will also add agressively to a trade during a run often day trading it and letting the original run with a trailing stop.

As you can see this is designed to minimise loss and maximise gain pro actively rather than set and forget passive trading. Only suited to discretionary trading.
I have set rules.


----------



## sinner (11 May 2011)

Bulkowski has a great section on pullbacks

http://thepatternsite.com/pullbacks.html

I like trading the first pullback in 9/30 type setups seen here

http://www.trading-naked.com/mb-9-30-setup.htm

but also, you can use this strategy in P&F charts and I have used that sometimes on the EURUSD 10tick/1box reversal p&f, I saw motorway once post a very simple trading rule system for 1 tick p&f charts from the 1920s or similar that waited for the pullback and then move in direction of trend which is when you enter the trend.


----------



## pavilion103 (11 May 2011)

I know there are a lot of complicating factors but in general does trading a pullback allow a tighter stop?

Also, does the set up I traded in my sim (original post) look ok? Are these the types of set ups worth looking for?


----------



## tech/a (11 May 2011)

pavilion103 said:


> I know there are a lot of complicating factors but in general does trading a pullback allow a tighter stop?
> 
> Also, does the set up I traded in my sim (original post) look ok? Are these the types of set ups worth looking for?




Your ALK trade I certainly wouldn't call a pullback.
Generally the stop can be tighter but unless you wait long enough to know within reason that the "pullback" has stopped pulling back then you'll be stopped out more often than not.
They are complex structures which BOGGO alludes to.
Not just a simple wait for a bar to pause.


----------



## pavilion103 (12 May 2011)

I did some further research and found this. A bit of a summary about Pullbacks. 

It appears that these are some of the advantages:
- *Offer potentially higher Risk:Reward ratio* (as I suspsected)
- Offer a more obvious/logical stop loss point
- Confirmation of trend - it can be easy to misidentify a trend in a breakout (especially for beginner traders like myself)

Would be interested to see if anyone has any other points or disagrees with these. 

Definition
Pullback occurs after a breakout of a certain psychological level, when price returns to the level it previous broke. If price bounces from that level, it is said that price 'pulled back' to the level. The psychological level can be a Support level, a Resistance or even a dynamic level (trendline).

The Pullback is a very strong trading signal, due to several reasons:

1.Confirmation of Trend - The breakout prior to the pullback confirms that price is in a strong trend, that is capable of breakout psychological levels. This empowers our trade and gives us extra-confirmation which, if we traded the breakout itself, we would not have. This way we trade pattern but give resepect to the prevailing trend - and combine swing trading with trend trading.

2.Logical Stop Loss - When trading pullback, we know exactly where to place the stop loss, contrary to the breakout in which we do not have a logical stop loss position. Our stop loss is also smaller when trading pullbacks. *This improvement in stop loss can result in much higher risk:reward ratio, better profitability and smoother equity curve.* Even the smallest decrease in your stop loss size can have an astounding effect on your balance. 

3.Chart Pattern is Confirmed - If we trade the breakout itself, it is possible that the chart pattern was misidentified and is actually too weak to trade. However, if we wait and confirm a breakout, the chart pattern is confirmed beyond any doubt and we have a much reliable signal.


----------



## pavilion103 (12 May 2011)

tech/a said:


> Your ALK trade I certainly wouldn't call a pullback.
> Generally the stop can be tighter but unless you wait long enough to know within reason that the "pullback" has stopped pulling back then you'll be stopped out more often than not.
> They are complex structures which BOGGO alludes to.
> Not just a simple wait for a bar to pause.




Yeh I know, I am clutching at straws a bit with that one. 
Do you think if is had come closer to the old resistance (potentially new support) level and stayed around there for 3-5 bars then that would constitute a pullback? 

I'm not sure if there is a general rule/consensus/thoughts on what % retracement would constitute a pullback (e.g. 5% or something)?


----------



## pavilion103 (12 May 2011)

I am seeking to gain clarification on the below illustration. It might not be the best example but I want to know if my theory here is in fact accurate. 

In this example GUF breaks out of a trading band. The width of the band is 10 cents so I set the profit target 10 cents above the band (not that I would necessarily sell at this point). From this I can calculate my risk:reward ratio. 




On the *breakout* (not that this is a good breakout)
Entry: $1.30
Stop: $1.20 (8.3%)
Target: $1.43
Reward:Risk 13:10 = 1.3:1

On the *pullback* (say if it pulled back after the break at around $1.25 for a few days)
Entry: $1.25
Stop: $1.20 (4.2% - maybe too tight?)
Target: $1.43
Reward:Risk 18:5 = 3.6:1


Summary:
Breakout = 1.3 R:R
Pullback = 3.6 R:R

I'm not sure what the experienced traders think of this. Like I said, probably not the best example but just one to put my thoughts to paper and see if what I was thinking in my head makes sense.


----------



## sinner (12 May 2011)

pavilion103 said:


> I'm not sure if there is a general rule/consensus/thoughts on what % retracement would constitute a pullback (e.g. 5% or something)?




You are looking at it the wrong way around IMHO.

Look for a swing low or price action reversal bar with the trend you are trying to follow. Draw support at the lows, then look to see how well that support lines up with previous near-term resistance. 

In this case (NYSE:ORCL daily) I identified a breakout from an intermediate swing high and then wait for swing lows or price action reversal bars to form. These setups don't always work but they do always provide a clean picture of what is going on. A penetration of the 3 bar swing low indicates the breakout failed.


----------



## Boggo (12 May 2011)

pavilion103 said:


> 3.Chart Pattern is Confirmed - If we trade the breakout itself, it is possible that the chart pattern was misidentified and is actually too weak to trade. However, if we wait and confirm a breakout, the chart pattern is confirmed beyond any doubt and we have a much reliable signal.




This is getting into a whole new area which I don't really want to as you are really on track with your approach pavilion.
I would like to point out a trap with breakouts that often happens.
I have referred to knowing where a stock is in its life cycle (so has tech/a) and below is an (average) example of where you can get caught out.
My breakout system scan picked this as a breakout recently (twice actually) but just an eyeball glance saw a potential pattern that had formed and an associated problem with upside potential.

tech/a might like to apply some VSA to that breakout area that may add to what was happening on both breakout attempts as there was higher volume on both bars.

(click to expand)


----------



## pavilion103 (16 May 2011)

Having a look at some charts for breakouts and pullbacks I am so confused. 

With breakouts, I don't know when to enter on the day/bar of breakout and when to wait for a confirming day/bar before entry.
Are there any "tricks" or things to look for?


----------



## tech/a (16 May 2011)

pavilion103 said:


> Having a look at some charts for breakouts and pullbacks I am so confused.
> 
> With breakouts, I don't know when to enter on the day/bar of breakout and when to wait for a confirming day/bar before entry.
> Are there any "tricks" or things to look for?




What do *YOU* think are extenuating factors?
List them.
In other words you have found not all breakouts are equal.
So what factors in *YOUR* view make a better breakout to trade?


----------



## pavilion103 (16 May 2011)

tech/a said:


> What do *YOU* think are extenuating factors?
> List them.
> In other words you have found not all breakouts are equal.
> So what factors in *YOUR* view make a better breakout to trade?




Ok the things that come to mind for me are:
- the more times a stock touches the support/resistance level
- the longer those support resistance levels have been in play
- a breakout in the direction of the underlying trend
- breakout on high volume, wide spread bar
- effort to move (approaching and breaching resistance/support)
- gapping through resistance/support
- background signs of accumulation distribution


This is mainly what I look for. The issue I have is whether to enter on these breakouts or wait for confirmation. I'm sure you can understand how this is confusing for a beginner? There has to be reasons why sometimes I should enter on the breakout and others I should wait for confirmation?


----------



## Wysiwyg (17 May 2011)

You can use Fibonacci retracement in conjunction with an oscillator to aim for an entry point.

As an example:- 

Right now I am watching the price play on this chart because the company fundamentals are sound enough for me and I envisage a continuation when this retracement is complete. The formation of a hammer candle today poses the question is the retracement over but I think the general market trend will determine the full extent to a certain degree. 

I have a question and that is ...  High and Low tails are commonly used as point to point on a Fibonacci rather than the open and close of the highest/lowest bar. Personal preferences??


----------



## ginar (17 May 2011)

Darvas has some good stuff on breakouts . I generally look for a range repetition . trendline breaks are more reliable than any oscillator , fibs are only really useful in hindsite to judge strengths of pullbacks or breakouts . I keep it simple and use structure (price action) as my focus . im a huge believer in the KISS principle , has served me well


----------



## pavilion103 (17 May 2011)

I am struggling to determine when to enter on the breakout and when to wait for the pullback. The below example is not the best one but just used to illustrate a point. 

It is a potential short trade as it breaks through support. If I had entered on the green box (although there probably isn't enough info at this point) my entry would be 6.7% from initial stop loss. If I were to wait for confirmation the next day (purple box) entry would then by 12.9% from initial stop which looks too wide. 

If I were to wait for confirmation and enter on the purple box bar then *WHERE WOULD I PUT MY INITIAL STOP?*

Once again, I know this is not the best example but I simply use it to pose the question. Where am I going wrong?


----------



## tech/a (17 May 2011)

Its not too wide.
All you do is adjust your position size.
You can move your stop down to trail as soon as you like. Thus deminishing your Risk quickly.
In doing so though you may choke the trade.I tend to move stops only when I see a clear support or resistance zone---either in price or volume or both.

Just on this chart it is in wave 3 and nearing completion (1.618 to 2 x Wave 1) so wave 4 is near before finailsing to wave 5.
Bottom line is ther isnt a great deal left in this so would be one I would not consider---unless it was for a short quick trade.


----------



## pavilion103 (17 May 2011)

tech/a said:


> Its not too wide.
> All you do is adjust your position size.
> You can move your stop down to trail as soon as you like. Thus deminishing your Risk quickly.
> In doing so though you may choke the trade.I tend to move stops only when I see a clear support or resistance zone---either in price or volume or both.
> ...





Maybe I am missing something enormous Tech. 
This is how I position size for all my trades. 

Entry:        $2.40
Initial Stop: $2.09
So entry price is $0.31 from stop loss (around 12.9%)

Risk = $20,000 account x 1% = $200 per trade

Position size = $200/0.31
= 645 shares
Position = $1,348

What do you mean by adjust the position size. Can you show me using this example?


Also do you take the waves into consideration for all trades? I don't know anything about them, so can't even identify them on this chart!


----------



## tech/a (17 May 2011)

pavilion103 said:


> Maybe I am missing something enormous Tech.
> This is how I position size for all my trades.
> 
> Entry:        $2.40
> ...







> So entry price is $0.31 from stop loss (around 12.9%)




Simply the closer your stop is to the entry price the more stock youll buy.
Further away less stock.---thats all

As for waves its not that hard---do some reading and youll soon see them.


----------



## pavilion103 (17 May 2011)

tech/a said:


> Simply the closer your stop is to the entry price the more stock youll buy.
> Further away less stock.---thats all
> 
> As for waves its not that hard---do some reading and youll soon see them.




If the stop is that far away (12.9%) wouldn't that mean it would be a lower reward:risk ratio?
Do you feel this is only suitable towards the earlier stages of a move?

If there was a really good entry (from a technical point of view) towards the latter stages of a move which allowed a tightish stop loss so good reward:risk, would you consider taking it then?

Cheers


----------



## sinner (17 May 2011)

pavilion103 said:


> I am struggling to determine when to enter on the breakout and when to wait for the pullback. The below example is not the best one but just used to illustrate a point.
> 
> It is a potential short trade as it breaks through support. If I had entered on the green box (although there probably isn't enough info at this point) my entry would be 6.7% from initial stop loss. If I were to wait for confirmation the next day (purple box) entry would then by 12.9% from initial stop which looks too wide.
> 
> ...




Considered placing your stoploss at the most recent minor swing high for shorts and most recent minor swing low for longs?


----------



## pavilion103 (17 May 2011)

sinner said:


> Considered placing your stoploss at the most recent minor swing high for shorts and most recent minor swing low for longs?




I am trying to identify these points and place stops accordingly. I think sometimes I am unsure just how much support/resistance I need when placing a stop.

I have also been placing some stops (not very often) at the high/low of control bars. I'm not sure if this is wise. I guess the key is to place the stops just under/above strong resistance/support areas, but just how much strength is needed I am not sure.


----------



## sinner (17 May 2011)

pavilion103 said:


> I am trying to identify these points and place stops accordingly. I think sometimes I am unsure just how much support/resistance I need when placing a stop.
> 
> I have also been placing some stops (not very often) at the high/low of control bars. I'm not sure if this is wise. I guess the key is to place the stops just under/above strong resistance/support areas, but just how much strength is needed I am not sure.




To me it seems like you are just moving for the sake of moving, without knowing what is going on at all.

I am not saying that in a disparaging way, but trying to give my honest opinion.

You seem to think buying and selling breakouts is a good idea. That is a fine premise (assuming you understand the mechanics of what is actually happening). 

But at the same time, you seem to have no idea what exactly you *expect* from the breakout, and thus obviously displaying troubles about when your expectations are or could be wrong. 

IMHO you have come too far in the dark, you need to go back to square 1 and turn the light on. 

1. Setup.
2. Trigger.
3. Follow through.

Where are you in those steps? The title of the thread should help put you back on track. To me it seems like you haven't really got the setup figured yet.

As tech/a always likes to say "once you have the *why*" it all comes together.


----------



## tech/a (17 May 2011)

pavilion103 said:


> If the stop is that far away (12.9%) wouldn't that mean it would be a lower reward:risk ratio?
> Do you feel this is only suitable towards the earlier stages of a move?
> 
> If there was a really good entry (from a technical point of view) towards the latter stages of a move which allowed a tightish stop loss so good reward:risk, would you consider taking it then?
> ...




Yes in the short term.
again it is important to understand the concept of Risk Reward.
Its a figure which is calculated from *CLOSED *trades.
and EXPECTATION of profit isn't a positive expectancy---it might be your own but a positive expectancy is a positive R/R over a number of closed trades.
Dont get so hung up on super tight stops to increase the expectancy if it goes your way.

Sinner is in essence on the money.

I think sometime spent on the above topic will clear the cobwebs and get to the *WHY*.

Quickly
15 losses of 20c and one win of $10 gives a positive expectancy for that method over 16 trades.
Whats yours?


----------



## pavilion103 (17 May 2011)

sinner said:


> To me it seems like you are just moving for the sake of moving, without knowing what is going on at all.
> 
> I am not saying that in a disparaging way, but trying to give my honest opinion.
> 
> ...




Thanks for the detailed feedback. I have copied and pasted it. I know I am doing a lot wrong because I am not getting the desired results, so any feedback is like music to my ears. It takes me 1 step closer. 

I want to make sure I follow.
This is basically what I'm doing at the moment:
- run the scan for breakout/potential breakout stocks
- draw in trendlines, support/resistance, patterns etc.
- wait for a break (which looks good based on the previous 3-5 days price and volume)
- either enter on the breakout or wait for confirmation (depending on the situation)
- try to trail it as it progresses (I have little idea where to trail it and am trailing it too tight)

You are 100% right. I have no idea what to expect from a trade. I do draw in a hypothetical profit target based on the size of the previous range etc. *But in essence I do not know how much I expect a trade to move.* 

I haven't been able to generate many wins at all over 1.5-2R!!! I think the two problems are 1. Not trading with enough momentum 2. Not letting the trade run long enough. I think it is a combination of these. 

From what I have said above what do you suggest I look into? I am prepared to do anything to get this right. I don't care how much work it takes.


----------



## pavilion103 (17 May 2011)

tech/a said:


> Yes in the short term.
> again it is important to understand the concept of Risk Reward.
> Its a figure which is calculated from *CLOSED *trades.
> and EXPECTATION of profit isn't a positive expectancy---it might be your own but a positive expectancy is a positive R/R over a number of closed trades.
> ...




Thanks Tech.
Yeh I understand the expectancy of a system. 

I've only completed about 50 trades on my simulator.
My average win is only around $200 (1R)
and my average loss is around $170 (0.85R)
My accuracy, however is only around 35%
Which works out to an abismal expectancy of around -0.2

I love the analogy mentioned by Sinner about the light. I do feel at the moment like I am in the dark. 

I am taking the steps mentioned in the above post. I cannot seem to identify high momentum trades which give me large R multiple wins.


----------



## tech/a (17 May 2011)

pavilion103 said:


> Thanks for the detailed feedback. I have copied and pasted it. I know I am doing a lot wrong because I am not getting the desired results, so any feedback is like music to my ears. It takes me 1 step closer.
> 
> I want to make sure I follow.
> This is basically what I'm doing at the moment:
> ...




Your fighting an up hill battle.
Nothing much is trending so to expect breakouts to continue in the short term is un realistic.
If you have a look at where these breakouts are occuring in the life cycle of the chart youll find many are topping.
Thats ok but before they move even further into another cycle of trending they are likely to pull back and range.

Timing at the moment ---regardless what and how you trade---is pretty awfull.
If I get sometime tonight Ill chart up.


----------



## sinner (17 May 2011)

> You are 100% right. I have no idea what to expect from a trade. I do draw in a hypothetical profit target based on the size of the previous range etc. *But in essence I do not know how much I expect a trade to move.*




To me it seems obvious that this is the crux of your issue.

You are still (IMHO) looking at it around the wrong way so let's remove ourselves from the current example and use something fresh to try and get the concept across.

----------------------------------------
In "Trading in the Zone" by Mark Douglas he gives an anecdote, of the floor trader for a large investment bank. He is a bit of a dinosaur, doesn't know anything about technical analysis at all. So he calls in one of the younger traders, for a briefing on technical analysis. The trader fires up his Soybeans futures chart, and draws a few lines, trendlines, support etc. 

Then he says to the dinosaur, "Soybeans are a buy when they touch this line here, they'll bounce and go up to prior resistance from that level". The dinosaur looks at him funny and asks him if he is sure, but the young guy is sure, so they sit to watch the chart as the trading day develops.

About halfway through the day the Soybeans chart declines to intersect the trend line and looks like it is beginning to bounce. The young trader calls his own guy on the floor and puts an order in to buy a few Soybeans contracts. 

At this point the dinosaur looks at the young guy funny again, and asks "are you sure that this is where it's gonna stop?" the young guy eagerly nods his head. "Technical analysis!" he says. The dinosaur picks up his phone to the trading floor, and says into the receiver "sell 1,000 front month Soybeans" then hangs up the phone. 

A few seconds later as the Soybeans chart has crashed through the trendline, the young trader looks pale as he calls in to sell his contracts for a loss while the dinosaur calls in to cover his shorts for a much larger profit. 
----------------------------------------

Now the moral of the story is *not* "technical analysis is for fools and big orders make it useless". 

The moral of the story is about expectations. 

Once you enter the trade, the outcome is not in your hands. On a trade by trade basis, the outcome is essentially random. It is only on a much larger scale of closed trades that the edge becomes apparent. 

So by what you expect, I didn't mean, expect 3 for 1 every 1 risked. Or whatever. 

Now we can go back to your example: you enter a long on a bullish breakout setup. It's bullish to you specifically because your testing shows that statistically, it is bullish. 

Now, what are you expecting from this trade? 

*In terms of profit, it simply isn't known! Some dinosaur could come along and sell a billion dollars of the stock you just bought, or Goldman Sachs might be taking over the company. Anything is possible*

But, there are expectancies you can define:

For example

"If I trigger a long from my bullish setup and the price falls back to the breakout level and continues lower to close below the nearest swing low *I expect that the breakout has failed, and would like to exit at an N% loss*."

"If I trigger a long from my bullish setup and after 5 days the price still hasn't retraced to my entry point, *I expect the breakout has potential to mature into a real trend so I will move my stoploss to breakeven and let the trade run.*"

"If I trigger a long from my bullish setup and the next day it prints a bearish reversal bar, *I expect a 2b setup is in play and exit for breakeven*."

"If I trigger a long from my bullish setup and it retraced to the breakout level and then formed a bullish key reversal pattern *I expect this to be a good place to attempt a pullback trade."*

etcetera, etcetera.

Remember, I stated what I viewed is the problem: you don't know what you are expecting.

and I didn't mean, how many Rs worth of profit you expect! Some will be small winners, some will be small losers, most of these trades will net out to 0 against each other. Don't worry about that. Just try to stay in the game and as long as you know the answer to the *why* of your setup (why does your setup have the potential to hit home runs? Usually the answer for breakout setups is that they put you first in line for all the moves - you buy high to sell higher and sell low to cover lower), then you should have no issues executing it again and again looking to hit that home run which moves your equity curve up a notch.


----------



## pavilion103 (17 May 2011)

sinner said:


> To me it seems obvious that this is the crux of your issue.
> 
> You are still (IMHO) looking at it around the wrong way so let's remove ourselves from the current example and use something fresh to try and get the concept across.
> 
> ...




Very insightful post. Thank you for taking the time to compose it. 

What this has made me realise is that I don't have anywhere near the level of expectations I need. My trading expectations are a bit wishy-washy.

I think because I have read so much and there is so much to take in I am experimenting with a little bit of this and a little bit of that and am *still trying to figure out (through testing) what actually works*.
I guess this is something that comes with lots of testing and more experience?


----------



## pavilion103 (17 May 2011)

tech/a said:


> Your fighting an up hill battle.
> Nothing much is trending so to expect breakouts to continue in the short term is un realistic.
> If you have a look at where these breakouts are occuring in the life cycle of the chart youll find many are topping.
> Thats ok but before they move even further into another cycle of trending they are likely to pull back and range.
> ...




That is a question I was going to ask. The overall market seems to be ranging? There doesn't seem to be much trending. 

Do you find yourself trading less during this time?


----------



## Boggo (17 May 2011)

pavilion103 said:


> Do you find yourself trading less during this time?




In my case the answer is a resounding yes, a lot less.
Watching a number of potentially fantastic setups taking shape is where my attention is at the moment.

A current holding is ILU which if you have a look at where it turned back up will give you an idea of what I am looking for and preparing for.
There are a lot of stocks that have topped and now seem to be in the latter stages of this type of correction, ILU seemed to jump the starters gun.

Just my 

(click to expand)


----------



## tech/a (17 May 2011)

pavilion103 said:


> That is a question I was going to ask. The overall market seems to be ranging? There doesn't seem to be much trending.
> 
> Do you find yourself trading less during this time?




In my situation yes as well.
You just dont get the setups that I would take as a trade.

Currently I have no open positions which has everything to do with 2 mths in Europe and nothing to do with the market!

I'm shutting down from all things which are considered WORK!


----------



## Boggo (23 May 2011)

Boggo said:


> A current holding is ILU which if you have a look at where it turned back up will give you an idea of what I am looking for and preparing for.




Just a follow up, took profits on ILU, stopped out at $14.59.

(click to expand)


----------



## pavilion103 (23 May 2011)

Boggo said:


> Just a follow up, took profits on ILU, stopped out at $14.59.
> 
> (click to expand)




Sory for my ignorance. But was that stop level some sort of retracement? or how did you determine that?

Cheers


----------



## Boggo (23 May 2011)

pavilion103 said:


> Sory for my ignorance. But was that stop level some sort of retracement? or how did you determine that?
> 
> Cheers




A break below the low of the last bar prior to the most recent high.

Keeps you out of trouble on volatile stocks or on stable stocks in a volatile market.


----------



## pavilion103 (9 June 2011)

One thing I have really been focusing on recently is how to reduce my average loss. Whereas previously I was losing around 1R per trade I have found that more of my losses are now falling in the range of 0.4R-0.8R.

This seems to have coincided with trading more Retracement Setups.

In the chart below my entry is the green line ($2.26) and my initial stop is the thick red line at $2.38 inside the triangle pattern. As you can see, I have waited for a pullback to the triangle and then entered on a close below the retracement setup. After the down day which follows I trail my stop to 1 tick above the pullback high at $2.33. 

Now instead of having my stop at my initial 1R level it is at 0.6R, almost half the risk. Granted this can see a trader stopped out more often, however should the trailing stop be at a strong point of support/resistance or pivot low/high then this seems to work well.

What are other's thoughts? Is this what most people do to reduce risk?


----------



## white_crane (11 June 2011)

Excellent thread with some great info.. Thanks to all the contributors.


----------



## Boggo (11 June 2011)

Almost forgot about this thread. Current pullback and re-enter positions.

Bought back into ILU at an average of $15.37 triggered by the breakout above $15.28.

Similiar setup on ALK (ALK thread here... ALK posts )
Entry was on the break of $1.82, first hurdle was a close above "B" at $2.36 but that has not happened yet, nearly though, expecting it to fall back a bit on Monday, stop is below $2.17.

As I suspect that next week could be a test for both ILU and ALK, the usual procedure applies, tight stops and no hesitation to bail out and sit back and watch.

(click to expand)


----------



## IFocus (11 June 2011)

Nice work Boggo


----------

