First of all, what is a breakout trader?
It's a type of style in which we look for a clear consolidation period, and we aim to trade after the pattern is broken. Check the main chart on TSLA to get the concept. The main idea of this comes from the Elliott Wave principle, in which consolidations tend to be the beginning of a new motive wave or impulsive wave. Why are we saying "Tend"? Because it's a probabilistic scenario, we do not have certainty about any given trade outcome. (We will speak about this later)
Let speak about the main idea of this
There are 4 types of corrective patterns that you can use to wait for a breakout. We have seen that the best structures to trade are Flat, Zig-Zags and Triangles. Irregulars tend to be confusing situations. now we will check some key ideas that we have learned
Always trade above B and set your stop loss below the structure
By doing this, you will be able to avoid many fake-outs, which will increment your Win Rate. Also, you must look for situations where you have a risk-reward ratio above 1.7
Here you can check an image where trading above B would have saved you from a fake-out.
Context is Everything
Never trade a structure because looks nice. You need to find a beautiful context for every structure you are planning to trade. Take this situation as an idea of a great place to develop a setup.
What can you expect from this type of trading?
You can expect to have a win rate between 45% to 60% depending on your level of accuracy looking for structures. And you can expect an average risk rewards ratio of 1.7 / 2
Thanks for reading!
It's a type of style in which we look for a clear consolidation period, and we aim to trade after the pattern is broken. Check the main chart on TSLA to get the concept. The main idea of this comes from the Elliott Wave principle, in which consolidations tend to be the beginning of a new motive wave or impulsive wave. Why are we saying "Tend"? Because it's a probabilistic scenario, we do not have certainty about any given trade outcome. (We will speak about this later)
Let speak about the main idea of this
Always trade above B and set your stop loss below the structure
By doing this, you will be able to avoid many fake-outs, which will increment your Win Rate. Also, you must look for situations where you have a risk-reward ratio above 1.7
Context is Everything
Never trade a structure because looks nice. You need to find a beautiful context for every structure you are planning to trade. Take this situation as an idea of a great place to develop a setup.
What can you expect from this type of trading?
You can expect to have a win rate between 45% to 60% depending on your level of accuracy looking for structures. And you can expect an average risk rewards ratio of 1.7 / 2
Thanks for reading!