Ask Barry: “Chat Rooms and Break Out Trading.”

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Here’s another question from the “Ask Barry” service.

This is a service where anyone can ask me a question about the market, technical analysis, trading, money management, etc.

You can use the form in the right column of this blog (scroll down a bit to find it). I personally respond to all questions by sending you an email, and some questions get posted in this blog.

Today’s question:

“I’ve traded for a few years actively and have not done well. I’ve joined a number or chatrooms that post great results but haven’t seen them during my time. I have noticed a change in intraday market setups the breakout and breakdowns are not easy to spot and when they do many times they reverse. Do you have any advice? Thank you.”

I’m with you brother. I’ve been in many, many chat rooms over the years and have yet to find one that I could follow with consistent profitability.

However, I did find a TREMENDOUS value in chat rooms. I learned that the best chat rooms to learn from are those that are free and that allow the users (not the moderators) to chat a lot.

These rooms are worth their weight in gold.

Here’s why:

I would just sit and listen (or watch their typing) and then compare what they were saying to how the charts looked. When you do this you are getting into the head of the loser, and that’s very valuable.

Not to be insulting, but the truth is that 95% of the users of those chat rooms are very poor traders and are definitely “losers” in their trading.

If you can listen to those people and, through repetition, learn how they read charts, it will help you to trade against them.

Also you want to watch out when you find yourself agreeing with them. That’s a great revelation for you because you can uncover your own “loser” thinking that way.

This may sound kind of silly, but I’m totally serious. I personally used this for 2 years as an exercise to improve my own trading and it really worked. When I watch a chart now I can almost “hear” what the losing traders are thinking at various points on the chart!

Regarding breakout trading … I’ve never been a big fan of it. One of my mentors taught me his method of breakout/down trading and it never felt right to me. So I completely abandoned 95% of what he taught me simply because it never made real sense to me and it didn’t fit my personal style and risk tolerance.

In my opinion, by the time a market breaks a level, you are late to the party. Most of the pros I know get in before levels are broken … and that’s certainly what I do.

Having said that, I have developed my own type of “breakout” trade that uses the expansion/contraction cycle along with cycles. But I only take it when I have at least 4-5 different energies aligned and even then I only risk 1-2 bars (which is all I risk on any trade).

I explain this trade in my later courses … sorry, but it’s too much to explain in a single letter like this.

Happy Trades,

Barry

2 COMMENTS

  1. This brings back some memories for me. I remember being in a stock daytrading room where the head trader made calls and I would sit and watch him make 3-4 points or more everyday.I would take the exact same calls but I would end up at a loss each day and couldn’t figure out why. After months and months of doing it on my own I finally got mentored by a professional trader and then I realized that having confidence in your method makes all the difference in the world. I lost while the other traders made money simply because I had very little market knowledge and absolutely no confidence in HIS System. It wasn’t until I developed a method that fit my personality and both back and forward tested it that I was able to start becoming profitable on a consistent basis. This did not come without hard work and sheer determination, and a lot of tweaking. Good article.

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