I remember the first time I visited Ho Chi Minh City in Vietnam, I was absolutely astonished at the amount of traffic.
Thousands of scooters whizzing past at a crazy speed made it seem almost impossible to walk across the road without being hit.
On some streets, you can’t really wait for the traffic to die down, or for a gap to appear in the traffic because it’s often a relentless stream of non-stop scooters.
So how do you get across the road and actually survive?
Well, the best approach is to take a deep breath, step out onto the road confidently and just keep walking.
The traffic will move around you and amazingly you have a pretty good chance of getting across the road unharmed.
However, you will see the occasional tourist who takes a few steps out onto the road, stops, and then tries to start dodging the oncoming traffic, moving back and forth erratically…
And that’s just a recipe for disaster.
The whipsawing back and forth makes it difficult for the scooter riders to adjust their path, increasing the odds someone will get hurt.
On a trading forum recently, I saw a post from a trader complaining about being whipsawed in the markets, with the market moving back and forth, and he was starting to hurt.
He’d enter a trade only to be stopped out on a false breakout.
He’d then enter another trade, only to be stopped out again.
And then again.
The false breakouts were relentless, and it was a painful situation for the trader, but it wasn’t just hurting his trading account, it was damaging his confidence too.
Seeing this whipsaw post reminded me of ‘The Whipsaw Song’ by trading legend Ed Seykota, where Ed shares what he calls the ‘6 essentials’ to his trend following approach.
The video was released about 10 years ago I think, but the trading advice still applies today, and I suspect it will still apply for a lot longer too, so if you haven’t seen the song yet (or even recently) then I recommend you have a listen…
He ain’t no Britney Spears but it’s very entertaining and surprisingly catchy! You can watch it here:
Also, if you’re interested in discovering some fresh new techniques to smashing through false breakouts, stay tuned, because in the next few weeks I’ve got something new to share with you which could potentially be a game-changer for your breakout trading.
PS. In the meantime, if you want to discover how to start building breakout trading strategies fast, check out the 14 day breakout challenge here.
18 April 2018