Trading a Market Range Break-out

Trading a Market Range Break-out

Postby WHS Wouter » 05 Feb 2016 17:16

Trading a market range break-out
A market moving sideways will break out at one point in time. Based on highs and lows as well as support and resistance levels it is possible for the trader to determine the sideways range, targets and stops. The trader does not know if the break-out will be upwards or downwards. Both are possible.
Tip: some traders will only trade the break-out which is in the direction of the higher trend, or, if they trade both break-out directions, put less ambitious stops and targets on the break-out against the trend.

This example shows the DAX index in a range. The potential upwards range break-out and the corresponding target and stop levels are drawn in green. The potential downwards range break-out and the corresponding target and stop levels are drawn in red.

Forum_series_break_out_00.png

Preparing for the break-out
Once he has identified these six level the trader only has ... to wait. Instead of waiting and suddenly scrambling to place the correct combination of orders when the break-out occurs, the trader can use a unique feature of the NanoTrader platform: the OCO Entry.

OCO stands for order cancels other. When an order is executed the other order is cancelled. Unique to the NanoTrader is the fact that OCO can be used for entry orders i.e. orders to open a position. OCO entry can be selected in the order ticket*.

In short, the trader places a stop buy order at the top of his range (for the upwards break-out) and a stop sell order at the bottom of his range (for the downwards break-out). When one of these orders is executed, the other is cancelled automatically. Traders can also instruct the NanoTrader platform to automatically place the stop and target orders once a position is opened. This is done by selecting “Add contingent orders” in the order ticket*.

This example shows the two entry orders in place. One placed at the top of the range and one placed at the bottom of the range. The contingent stop and limit orders related to each entry order are also visible. Compare this illustration with the illustration above. The trader is now 100% ready for whatever break-out occurs.

Forum_series_break_out_01.png
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WHS Wouter
 
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Trading a Market Range Break-out

Postby WHS Wouter » 05 Feb 2016 17:21

A break-out takes place
A bullish break-out occured. The NanoTrader automatically (1) cancelled the short sell entry order and (2) placed the contingent stop and limit orders.

Forum_series_break_out_02.png

The market does not go up. In the next candle the position is stopped out with a loss.

Forum_series_break_out_03.png

Two hours later another break-out occurs. This break-out does reach the profit target.

Forum_series_break_out_04.png
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Trading a Market Range Break-out

Postby WHS Wouter » 05 Feb 2016 17:22

* This is the order ticket. It shows where to select the unique “OCO Entry” function and where to select the contingent orders.

Forum_series_break_out_ticket.png
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Re: Trading a Market Range Break-out

Postby Cerwinski » 21 Sep 2017 18:36

This looks like an interesting strategy. What sort of win rate does it carry?
Cerwinski
 
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Re: Trading a Market Range Break-out

Postby WHS Marc » 22 Sep 2017 12:40

Dear Cerwinski,

there is unfortunately no overall answer to your question.
The success rate of a strategy depends on many criteria: the instrument chosen, the timeframe plays an important role, the defined return-risk-ratio, the active trading time, the stop used, etc. These and other elements have to be determined by the trader themselves, this means that he hast to chose his favourite parameters. A slight change in one of these parameters can have a big impact on the success rate of a strategy. The performance of your favourite parameters can be backtestet with NanoTrader Full on empiric data. Please feel free to request a free of charge demo of our NanoTader platform via the following link: https://www.whselfinvest.de/en/trading_ ... utures.php in order to fulfill a significant backtest of this approach on your favourite financial instruments.

Best regards,
Marc
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