One of the plays I have been working on right now is a FLIP breakout trade (FLIP).
The trade goes like this. Lets say you wanna go long. The resistance level you wanna go long from is getting weaker and weaker, price is testing this level and every time it tests the level, it retraces back little bit less creating higher lows. This is one of the good signs of the high probability breakout trade.
Now when the breakout occurs you are long, focusing on immediate price action. As a trader you must expect the trade wont work and you end up losing. This is a first step before enterying the trade. So the level was broken and now you expecting momentum but the price just stops. Stops a bit above your breakout level, you are already in and you know this might be troubling. You have chosen this level to see the momentum above. The momentum is not there. Market is hanging just a few pips about your entry not doing anything. This is the time when you are using your IF-THEN scenario prepared before the entry. This IF-THEN scenario says: if the market breaks as important level but doesn’t get the right momentum and get stuck few pips above, you should use options you have prepared before you have even entered the trade:
- cover once the price goes BELOW SL
- tighten SL if the price geos 1/2 from your SL and returns to the breakout level
- IF I cover at by original SL, can I re-enter SHORT aka FLIP sides and ride the market down instead of up
Of course as every play even a FLIP must have defined the big picture, money management, exit and entry. Most importantly, you have to be prepared for every option before even entering the FIRST long trade. This takes practice. If you are not prepared, you are going to end up overtrading and taking PLAYS which are not completely valid and wort your time. If you are not ready, you are going to lose! And we hate losing.
Here is the example: