Break Out Trading Strategy!
A lot of NEW Traders think that since a lot of other strategies are much harder to trade. Than a break out strategy. They think trading with breakouts is easier. When in fact. All trading strategies can become complicated if you let ‘fear or greed’ alter your judgment.
Because what is known as a “Head Fake!” can make a lot of new traders lose at their attempts to trade a break out strategy. I have my own name for it. I call them ‘buy fakes and sell fakes.’ In a bullish break out I call it a Buy Fake! In a bearish break out I call it a Sell Fake.
“I Call Head Fakes Buy Fakes And Sell Fakes!”
If both buy fakes and sell fakes are suppose to be called ‘Head Fakes.’ To me it does not make total sense to call it that. A head fake would be known for price to go up right? To go long right? But to go short calling it a ‘Head fake’ just makes no sense to me. This is why my way of calling it makes perfect sense calling it a ‘Sell Fake!’ Because the price is breaking out to the down side. Hence: ‘Sell Fake!’
Now that we established the difference between a ‘Head Fake and a Buy Fake.’ We can now get into the pros and cons of trading a break out strategy. I myself have tried so many times to trade break out strategies and failed. Why? Because my style of trading. I like to get on the train just as it’s leaving the train station.
Price Consolidation Also Known As A Small Trading Range!
When trying to trade a break out trading strategy the train has already left 100 pips ago. You see, when a breakout happens. What they like to call a consolidation of price movement has been occurring for quite some time tricking traders to either go short of a false price range break.
Or to go long from a false price range break. Both resulting in losses for those traders who tried to go long at the top of the price range break. Or go short at the bottom of the range price breakout.
I know what I just said may be a little bit hard to read and understand. So how about we take a look at a few price chart examples. So you can see exactly what I am referring to. Like they say. A picture is worth a thousand words.