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Hello,
This is my understanding of BOM:
- 50 percent chance of successful bull BO
- 50 percent chance of succesful bear BO
- 50 percent chance 1st BO up or down will fail
And BOM occurs in trading ranges where there is reason to believe the market is close to neutral in directional probability. For example, a protracted trading range lasting at least 20 bars occurring after a trend.
Then there is something I don't understand - please correct me on this. The 80 percent rule says that 80 percent of BO attempts from trading ranges fail. How does this work together with BOM where there is 50 percent chance 1st BO up or down will fail?
Thank you in advance, Andreas
Maybe because 80% FBO is a generalization:
Hello, BOM (Breakout mode) accurs when you have a TTR (tight trading range for several bars) an iii pattern. Prices are congesting and a breakout will occur. It will either occur up or down and there is 50% chance that it will fail, trap traders in wrong direction and go the other way.
When a trading range is broad than 80% of breakout attempts will fail.
Just like when a trend is strong 80% of reversal atempts will fail.
BOM (Breakout mode) accurs when you have a TTR (tight trading range for several bars
Not sure if that is correct since it is stated so in the Encyclopedia:
I see. If any trading range is BOM, then I am still not sure how to differ between 50 percent chance and 80 percent chance of the breakout failing.
Perhaps it is because 50 percent of the breakouts that break strongly beyond the extremes of the trading range have 50 percent chance of failing, and as you say, 80 percent is a generalization of the weaker breakouts attempts within the trading range itself that fail 80 percent of the time to break through the extremes?
