I received several questions regarding HBO's my new setup that I started using regularly to take advantage of volatility. HBO mainly stands for Hourly Break Out, in this technique I use the hourly charts to identify key support and resistance levels that formed over the past 3-10 days.
I trade these setups regardless of the trend on the daily chart. I get excited when an HBO forms at a round number, preferably at .00, .25, .50 and .75. I play these setups in co-ordination with time & sales, I like to see a level break and hold before entering especially when the move is counter trend.
I could also take a breakout on a pause below my HBO level. Volume also plays a huge role in identifying levels that could follow through; activity at these levels where the bids or offers get hit and breached then hold afterwards provides confirmation.
The time frame that I use for HBO’s is the hourly chart, which is used for HBO identification and the 2 minute chart that I use for HBO entries. The reason I use the 2 minute is that these moves might not last very long and the waiting for a 5 minute confirmation could provide me with a late entry where I miss the move.
As for profit taking, I use 2 techniques to take them. The first is after enter I use the 10 EMA and 20 SMA on the 2 minute chart to trail my profits till I get a candle close above or below them. The second technique is to book profits on momentum at a pre designated level with risk/reward being above 1/1.5 and as usual, my stops are automatically moved to break even when R/R is 1/1 to have a freebie where I get a free trade with no downside.
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