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My Breakout-Breakdown Trading Strategy for Using eSignal

My Breakout-Breakdown Trading Strategy for Using eSignal

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Published by Michael Harnack

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Published by: Michael Harnack on Oct 25, 2010
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10/25/2010

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My Breakout/Breakdown Trading Strategy for Using eSignal Strategy: 2-Day High/Low Breakout Strategy Using eSignal

on 6 monitors, I combine this breakout strategy with several of eSignal's advanced chart indicators to identify breakout-long and breakdown-short trading entry opportunities. Advanced Chart Indicators Used: 1-minute candlestick chart, Fibonacci retracements, stochastics and volume bars with time and sales (expanded view). Market Charts Used: 1-minute line TRINQ chart, 1-minute line COMPQ chart, 1-minute line $SOX $GSO $NBI sector chart indicators. I use a quote box with ranked sector percentages (change from open) and a 2-day, 2-minute candlestick chart to identify when a stock is moving outside of the previous day's trading range on higher volume. Timing: Trades of 1- to 15-minute round-trips executed primarily during the 9:40 a.m. to 10:30 a.m. (Eastern Time) time frame on days on which the Nasdaq composite (COMPQ) is trading outside the previous day's high/low range.

Trade Entry Using eSignal: Starting at 9:35 a.m. (ET), scan for stocks that are making the strongest percentage change (from the open) in a quotebox. Pull these up on a linked chart to identify those that are moving outside their previous day's trading ranges (screenshot 1). The goal is to identify stocks for long/short opportunities once they have moved above the previous day's high or below the previous day's low.

Filters: To avoid false breakouts/breakdowns, use the following indicators: (a) The stock must be in one of the strongest 2 sectors for the day (as measured by percent change from open), (b) The stock's volume bars on the advanced chart must be increasing during the 3 minutes prior to the trade entry, (c) Time and sales must be speeding up (faster transaction rate) at the time of entry, in the direction of the trade, (d) Entry should be no sooner than .3 points higher than the previous day's high for a long or no sooner than .3 points lower than the previous day's low for a short (screenshot 2). Trade Exit Using eSignal: One of eSignal's many strengths is the ability to use an expanded time and sales chart in combination with the Advanced Chart indicators. Use a trailing stop of no greater than .2 points for all daytrades, and look for an exit when the expanded time and sales

chart starts to show a slower rate of transactions and/or a "green and red" pattern, where transactions are beginning to reflect equilibrium between buyers and sellers; this provides an exit signal. eSignal's Advanced Charting: Using Fibonacci retracement lines and stochastics on a closeup 1minute candlestick chart is an excellent indicator for spotting reversals and trade exits. Use the market charts (sector charts, TRINQ, COMPQ) and time and sales to help spot entries, use the closeup 1-minute Advanced Chart with time and sales to help spot trade exits. Tip: Keeping several dozen small 1-minute line charts open (thumbnail sized) on several monitors helps the astute daytrader spot momentum entries, which can then be examined more closely using the 2-day, 2-minute and 1-minute candlestick closeup advanced chart.

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