Trading Strategy: Waiting for Breakout Confirmation

TL;DR

Profitable trading requires waiting for sellers to complete their aggressive movement and confirm breakout levels before entering positions, rather than predicting when aggression will stop.

Key Takeaways

1Avoid taking long positions when the market is dominated by sellers, as this represents high risk.
2Wait for price to break and retest a level before entering a trade; staying out is better than premature entry.
3A failed auction occurs when sellers push price down but fail to achieve follow-through, creating a setup for reversal.
4Add positions incrementally on confirmed breakouts rather than entering on initial moves.
5Higher timeframe analysis reveals value area lows and distribution patterns that guide entry decisions.
6Don't predict when aggressive sellers will stop; instead, wait for them to complete their movement naturally.

Notable Quotes

“My role is not to predict when they will stop. I just wait that they complete this movement.”
— Trader

“When this level gets broken the game starts. You can add the position, you can follow up, you can do a lot of things.”
— Trader

Chapters

1. Risk Assessment and Market Dominance

Explains why taking long positions is risky when sellers completely dominate the market structure.

2. Entry Confirmation Method

Details the requirement to break and test a level before entering, with stop loss positioned below the level.

3. Position Management Strategy

Describes how to add positions and follow up on confirmed breakouts rather than entering all at once.

4. Higher Timeframe Analysis

Uses profile distribution and value area low concepts to identify failed auctions created by aggressive sellers.

5. Execution Philosophy

Emphasizes waiting for sellers to complete their movement rather than attempting to predict when aggression will stop.

Glossary

Value Area Low: The lowest price level within a trading range where the highest volume of trades occurred, identified through volume profile analysis.
Failed Auction: A price movement where sellers push the market down but fail to achieve follow-through, suggesting weakness in their aggression.
Breakout: When price moves beyond a previously established resistance or support level with confirmed volume and follow-through.
Profile Distribution: A visual representation of trading volume across different price levels over a time period, used to identify support and resistance.

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