After designing a breakout strategy, it’s time to improve the results. There are many methods but I will describe my two favorites. Filtering before the trade is one technique and recognizing a trend day is another method.

Filtering the days

Look for trends in the daily pl of your trading. Identifying a trend in pl that is either up or down is the goal. It’s always easiest to start with the losing streaks. Try and find correlating factors. Volatility is the most correlated for my system. After sustained upward volatility my overall pl and individual sectors level off at best or head into a drawdown. A simple 10 day moving average of daily range is the most basic filter. After a prolonged winning streak that shows a rise in the 10 day range, I will cut size and shift to more profit target trading. It’s time to be defensive. After range falls to a lower level I will return size to normal and be aggressive in my entry and let my profits run. The graph shows a 10 day mva on a daily chart

Trend Days

True trend days occur on 15% of the trading days. they have a basic pattern.

1. Price moves quickly away from the open.
2. Initial breakout trades will have little adverse movement.
3. Price will level off and then retest the breakout move to a higher level or lower level if the move is down.
4. Intraday breakouts will be with the trend or counter moves will be quick in time and price.
5. The time and price duration of consolidations will be shallow and consistent.
6. The finish will be strong in the direction of the trend.
7. The open and close will be on the opposite ends of the price bar and the overall daily range will be in the upper 15% of recent ranges.

As the trading day progresses use this as a checklist. The earlier you recognize trend days the better your results.