Chop Breakout Trading Setup and Rules

APT Ultimate Chop Breakout Trade:
Breakout when the market has lapsed into tight chop or coil chop with VAD A indicating when it will break out. Tight chop means no more than three bars in one direction before it switches direction. Coil chop means each successive bar closing the opposite direction. For example, one bar closes up, the next closes down, the next bar closes up, the next closes down. To be a valid breakout power play, a cluster must appear on the bar before chop started or on a bar somewhere in the chop or on the bar as it breaks out. When the breakout does happen, VAD A will be increasing gradually and exceeding the previous VAD in the direction at the break-out point. If the first VAD bar of a direction change is a tall VAD bar, this often indicates the price going in that direction will not last long. It will burn out quickly; thus, it is called a burn-out VAD bar. The power play breakout will almost always be after a fake breakout where it either had small VAD A volume, yet it broke through the chop box slightly OR a bar suddenly had crazy big VAD volume and breaks out only to burn out shortly after it broke through the chop box. The entry for a power play going “long” is 1 to 3 ticks above the high of the chop box or if a major level is just a few ticks above the chop box, place the order 1 to 3 ticks above the level. Stop is placed about 20 ticks below the entry. For a breakout going “short,” the entry is 1 to 3 ticks below the chop box or if a major level is just a few ticks below the chop box, place the order 1 to 3 ticks below the level if the level is just under the “box.” The stop would go about 20 ticks above the entry.

This setup is perhaps the most difficult for a newbie to understand and at the top of this section is a link to the Chop Training Course. The simple explanation is that first, there will usually be a fake breakout where the price goes outside the box but has no conviction and comes right back in to continue chopping. To break out, it needs some power. The bar before breakout or the bar breaking out will often have a cluster. Sometimes instead of a cluster at the breakout, there will be a cluster when the price is at the bottom of the chop acting as a reversal going to the top of the chop box and breaking long. Usually when this happens, there will be a mini magnet as it is breaking out of the chop box. The opposite is true for a short breakout. The cluster will happen near the top of the box like a reversal going short and then break out. Mini magnets and clusters printing randomly in a small space usually indicate chop is coming and swing levels and mini magnets will often, (not always) define a chop box.

Breaking out with Order Prints: