Break-in/Break-out Strategy for WSDT
Day trading strategies for WSDT Oct 21, 2019
Deploying the right strategy is one of the most important factors that give you an upper hand and a strong foothold in any competition. As we already know, WDST is intense competition and traders from all around the world bring on their best strategies to win.
Therefore, understanding and choosing the right strategy is very crucial.
There is a wide array of strategies that can be used in day trading. In WSDT I, the popular strategies that were used by the winners are:
- Pivot points
In this article, we will shed more light and delve into the break-in/breakout (also called “breakout”) strategy.
What is a breakout strategy?
Breakout means moving out of defined range or borders, therefore the breakout strategy is simply when the price of a stock moves out of defined support or resistance where you can see an increased volume.
In other words, when the price of a stock moves out of the resistance or support range it increases the volatility of that stock, and that is a breakout.
What makes this strategy very important is the fact that it shows price trends, prospective volatility, and relevant price changes.
How is a breakout strategy used in day trading?
As a day trader, it is very important to note when it is a good point to cash in and the right time to ‘bail out’. You must first check the flow of the recent behavior of the stock to get a plan. Use the recent price action to create a price target.
You have to factor in the price pattern of the stock, which is the point(s) between the ‘upper’ and ‘bottom’ lines drawn on the trend. This will help you to set the right price target and help to forecast when the stock breaks out.
Also, when using the breakout system, one important factor you must consider is discretion. This is needed to reduce fakeouts and false signals.
If the trend of a stock’s price is going up and a straight line cannot connect the bottoms of the price action, it doesn't mean there is no moving action or trend. In fact, this implies that you cannot take this trend as being contained by a single thin line.
Break-in/break out Strategy - Uptrends
These are the signs to look out for:
- When the candles are bullish
- It moves very well on trend
- Momentum is a great advantage
- Fast price movement
Break-in/break out Strategy - Downtrends
These are the signs to look out for:
- False breakouts can mess your trade
- Slow price movement
- Low volatility
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Is the Break in/breakout strategy popular among WSDT mentors?
There are two things we would like to highlight here:
- The fact that this strategy worked for some mentors who had certain perception.
- Principle of risk-taking and aggressiveness in day trading.
However, it wasn’t in the good books of some mentors, which falls on the fact that it didn’t fit into their core philosophy and principles of day trading.
For example, Pablo Martinez Garcia liked this strategy, he said:
“I think it is the best strategy for WSDT because it allows to operate a large number of actions during the first minutes of the market and obtain good results”.
But Ali Biggz didn’t like this strategy that much, he said:
“I think unless you are a very seasonal trader, with very strict discipline, this can be a disaster in today’s market. This type of trading involves taking a higher risk, but also requires that you have a very tight stop-loss”.
Is the Break-in/breakout a good strategy for WSDT?
This is what Gary K, one of the winners of WSDT I had to say about the breakout strategy:
“I chose the breakout and breakdown trading strategy which aimed at finding stocks that are moving and then hit the gas pedal once the stock showed a violent pattern in one direction or another. The breakdown style got me the highest gains during the competition.”
Interestingly, this is what Ali Biggz, who seems to be coming from a different “school of thought” on this strategy, had to say before WSDT I:
“Breakout or Breakdown strategy is a risky strategy to use in the WSDT because many people entering this competition are going to be new traders. With that said, many new traders are not using hard stops as much as they should be. This is a recipe for disaster because if you buy a breakout, and then the stock does a false break out, you have to be able to get out of a trade quickly.”
According to Ali’s words, It would take a good deal of discretion and readiness to take risks to use this strategy. In as much as you cannot rely on fast-moving price trends as a sole reason to trade, it makes this strategy quite risky to use.
While we would describe the breakout strategy like taking advantage of the high good waves and riding it, there would be times where that high rising waves wouldn’t be available, and you would need to factor in another strategy to win this competition. Also, consider the fact that false breakouts can occur and they might ruin your trade.
Nevertheless, this strategy can be very profitable in instances where certain events on the market have spiked up violent movements of stock prices.
Our overall verdict on this method of day trading would be that it is a very good strategy which several winners in WSDT I utilized but you must have a high level of discretion and a high risk-taking spirit to make the best out of it.
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