Trader Mike

TradingMarkets.com has posted an interesting study comparing the results of buying breakouts to buying pullbacks. The results are rather surprising to me. According to the methodology used in the study you would make more money shorting breakouts to new highs than buying them. Although I’m not a big proponent of buying breakouts I can’t help but think this study is flawed. The first thing that comes to mind is the money management aspect. Most breakout traders are pretty aggressive. The good ones would likely not just leave a trailing stop below the 10 day moving average like was done in the study. They would be locking in their gains and not letting significant profits turn into losses. It’s the exits that make/lose money, not the entries. I’d like to see a similar study done with different exit strategies.

Here’s the complete article: