I have failed to get into both cocoa and live cattle as they were breaking out to the upside. They were both breakouts that I had been expecting. I may yet get into either or both on a re-test of the breakout, but that is not the point. I wish that I was in already. Why did I fail to take the opportunities when I saw them?

  • The ability to spot breakouts as they happen is new — Tradestation has allowed me to do it. I have not yet adjusted my trading style to make use of this new ability.
  • I am more sceptical of longs than of shorts. If something breaks out to the downside and then pulls back, I am likely to short it, but if something breaks out to the upside I am more likely to wait for a re-test. This doesn’t make sense.
  • I have learned implicitly that waiting for a re-test of a breakout is a good strategy, which means that I feel uncomfortable doing otherwise — but I have learned it from currencies and equities, which are fuzzier than commodities. When a commodity breaks out, and especially an agricultural commodity, there is a strong danger of missing good trades if you always wait for a re-test.
  • Anchoring. Because I can see breakouts as they happen, I can also think about getting in on pullbacks on the same day; these are often very good entry points. Consequently, when I get another chance to get in at a higher price, I tend not to take it because it is fixed in my mind that a good pullback would be to the first, lower, level. When I only saw a breakout the day after it had happened, this was not a problem — I would come to the market fresh.
It is not just dim to have missed these trades: breakouts do fail, so there is some rationale for waiting for a market to close above the breakout level before going in. Also, my process up to now has of necessity involved buying only the day after a breakout, and it is a bad idea to change your process on a whim. However, I have now missed good entry points for this reason three times (I have forgotten what the first one was, but it was a downside breakout).
I think that in future I will be more inclined to buy a breakout on the day it happens if a good entry point is presented, and I will work on dropping my caution about long positions.