The TSF- Guide For Buying Breakouts
Substacks Most Comprehensive Guide For Buying Breakouts
In This Post You Will Learn How To Buy Breakouts
I will tell you everything you need to know on how to buy them and handle them. As well as how to think about position sizing, stop loss placement and how to enter if you miss the breakout, and what to do after you buy it.
And After That
You can read how to handle trades going your way:
Swingtrading Is Three Things
Entries, exits and emotions. You have to master all in order to be successfully profitable in the long run. In this post we will focus on the entry techniques of a breakout.
There are a lot more types of setups to buy, like anticipation buys and pullback buys. We will dive into these as well in the future.
As well as proper sell rules, portfolio management and how to handle trades that is going your way.
In Bull Markets We Usually Overestimate Our Trading Skills
In bull markets sloppy entries and poor risk management can work, since the overall market trend is up. You might have decent success without discipline or a real strategy.
But it is not sustainable in all market cycles. Just in this recent decline I can assure you that many have blown their account, by overtrading in a downtrend.
This Will Not Work In A Bear Market Or Choppy Sideways Market
You can still make great gains in a bad market, but sloppy trading will be punished and you will most likely bleed capital as we chop around.
Your entries and position sizing must be sniper sharp, in order for you to make any real progress in the portfolio.
Even If You Find The Best Superperforming Market Leader
You own index with leverage. It doesn’t matter how great the company is, how big the earnings are. If the overall market trend is down, the odds is not in your favor. You should push hard when the market is pushing, not when the market is deteriorating.
Here is NVIDIA together with the S&P 500 during the last 1.5 year. NVIDIA, a market leader by any metric during this time, follows the markets every move.
You must adapt your trading to the current environment.
Force Yourself To Make Good Entries
It is hard not to chase stocks. It still happens to me from time to time. We are human and we make mistakes. The FOMO is hard to kill.
But at least by trying and emphasizing to yourself how important correct entries are, this will help you improve over time.
Before buying any stock, make a mental checklist:
Is this a valid setup, or am I buying because I don’t want to miss a move?
I need a logical level to set my stop loss to be able to define my risk. Does that exist here? For example:
A previous low
A breakout candle low
A breakout level
A moving average
At exactly what level will I sell this stock if it goes against me regardless of what I hope it will do?
Am I violating my recommended market exposure by buying this stock? What is the recent market feedback — are my trades working or not? If not, you should probably sit on your hands.
Define the setup and strategy. Because it will influence when you should sell the stock. Is this a short trade or a longer swing. What is the plan after you buy?
There Are Many Strategies And Techniques
What works for someone might not work for the other. Find your style and risk tolerance and trade accordingly.
By simply having rules, knowledge and a strategy you are winning. Lets dive into buying a breakout correctly.