Chop Breakout Power Play
The Power Play is a breakout of chop when using VAD to confirm the breakout around a major price level.
WHAT IS A BREAKOUT POWER PLAY? When a market has been chopping around a major level, preferably ICE or a Deviation level, look for VAD confirmation that it is about to break out of the chop. This is a great setup to trade in Nadex binaries, spreads or in futures or forex. How far away from the level should the chop be occurring? A general guideline is one side of the chop should be within about a bar of the major level. When using VAD in this power play, VAD 1 or VAD V2 mode A is what is used.
Below is an example that shows how VAD actually kept us out of a trade that would not have worked out. Note: The template with the grey background is called Vad simple. The SEES template may also be used.
Now SEES what happens when that same chop is ready to break into a power play:
The screenshot below shows another example of VAD indicating when to take a power breakout trade. GC was chopping above the -1 deviation. When it breaks out, it is likely to be a profitable trade. VAD painted a picture of exactly what direction to go and when to take it.
TRADING IT WITH BINARIES: When the price hits 3 ticks above the major level or the edge of the chop if moving in the other direction, then select a binary strike that is about a $40 risk. Normally a take profit resulting in a $50 gain will be used. This means if a long, you buy it around $40 and sell it back around $90. If it is a short, you sell around $60 and buy it back around $10. The resulting profit is usually a little better than a 1:1 risk.
USING NADEX SPREADS: When the price hits 3 ticks above the major level or the edge of the chop if moving in the other direction, take a near-the-money-spread.
NADEX EXPIRATIONS: Give binaries at least an hour, no less. The afternoon breakout power play may take longer if its a slow day, so using the daily is recommended. Spreads near the money dailies are the best. If you prefer to take one with less time, give it at least an hour, preferably more.
TRAILING TIPS: There are several options to trail the Breakout Power Play:
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The MVP can be used to trail like is used in IZSS.
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The IR indicator outside lines can be used as a target. Its a good idea to protect some profit before it reaches these levels, but these are usually highly accurate targets. Give them room and time to work.
Below is the IR chart and what to look at for a target:
INITIAL STOP: Typically a 20 tick stop is the maximum needed for futures or forex. For spreads it is 20 chart ticks. For binaries, none is needed when using the low side of an at-the-money strike with the small risk incurred as explained above.
A combo play using a 10/10/720 continuum chart to highlight the chop a little clearer
