00:00Well, tell me how many times has this happened to you that you enter the trade on breakout and after seeing a little profit, the price reverses and hits the stop loss and goes down.
00:12It's not just you who has this problem. I often find it difficult to trade.
00:19There's no need to worry. In today's video, we'll discuss a breakout strategy that will help you identify fake breakouts most of the time and avoid entering such trades. Then, you'll have a winning streak in trading.
00:49There can be support levels or resistance levels, if the price breaks any of these levels then we call it breakout.
01:19After this consolidation, when the price breaks the support level and closes below the candle, the price continues its downward movement, forming large red candles without stopping. But the question is how do we detect such a setup?
01:49So we'll do it by looking at chart patterns. But what's new in this? I want to tell you one thing. When you study chart patterns, whether you're reading them in a book or watching someone's video lecture, let me just tell you...
02:19Along with this, it is also told where to make the entry,
02:23Where to exit and where to keep the target.
02:28But do such patterns really form on charts?
02:32The answer is no.
02:34All these chart patterns are theoretical.
02:37Just to explain it to you.
02:40But when you trade these patterns on the chart,
02:43So you will not see perfect patterns on the chart.
02:46For example, this is the chart of Tata Motor in one day time frame.
02:51You can see how the chart patterns are formed here.
02:56And if you look at such chart patterns on the charts,
03:00So you will not feel that this is the same chart pattern.
03:03Memorizing the name of a chart pattern and trading it will not make you profit.
03:10First of all you have to know the concept of breakout trading.
03:14I want to tell you that I have never tried to remember chart patterns.
03:21This is because I knew the psychology and reason behind the breakout trading concept right from the beginning.
03:28If you also know this, then you will not need to search for perfect chart patterns on the charts.
03:35It is a simple concept.
03:36Before a breakout occurs, the market should be in a consolidation phase.
03:42And the more consolidation there is, the more powerful the breakout will be.
03:47This is the simple formula.
03:49And that's why I make profits in the market.
03:53And most of the traders who trade only chart patterns end up making losses.
03:58So don't miss the chart pattern.
04:01Instead, whenever you analyze charts,
04:05Look at the consolidation of the price.
04:07So draw the levels above and below that consolidation zone.
04:13For example, here the price is in opportunity,
04:16So here we will draw lines at higher low and higher high points.
04:21And then you have to trade the breakout.
04:24Now after drawing the lines a question will come to your mind,
04:28Will the price break out from here upwards or downwards?
04:33Most traders invest as soon as the breakout occurs,
04:35Enter the trade immediately.
04:38And later they find that the price moves slightly in the direction of the trade,
04:42Then it reverses and goes against the trade, hitting the stop loss.
04:48Then you realize that it was a fake breakout and we should not have entered it.
04:54It is not right to enter a trade just because there is a breakout anywhere.
05:00Because 80% of the time the price breaks these levels,
05:05So that is a false breakout.
05:08There is nothing to fear.
05:10Now this question must be coming in your mind,
05:13How to identify the real breakout among so many fake breakouts?
05:18Whenever the price breaks out,
05:21So at that time you have to identify the momentum candle.
05:25That momentum candle may be a large candle,
05:28Or small identical candles can be formed and become equal to the big candle.
05:35Here the price is in the consolidation zone after the rally.
05:38Therefore, we will draw lines by joining the key levels above and below this consolidation zone.
05:46And whenever the price next time breaks the upper level of the consolidation zone and the candle closes above,
05:55So we have to make a plan for trade there.
05:58The problem with this chart is that this long candle, which is the momentum candle, has just closed at the top.
06:07That means it has not gone much above the upper level, it has closed just close to it.
06:13So here we will wait for the next candle.
06:16If the next candle turns bullish, then it will be a perfect entry setup for us.
06:24Now there are only three possibilities here.
06:26First, either the price will go straight up from here.
06:30Secondly, the price will come back to this level to retest it and then rally upwards.
06:39Third, the price moves directly down from here and our stop loss is hit.
06:45But if we enter on the momentum candle itself, then we will make profit in two scenarios.
06:51Even if the price goes up from here, we will still make a profit.
06:56If the price comes to this level for retest and then rallies, you will still make a profit.
07:03And in case the price goes directly down, the stop loss will be hit.
07:09But we have three probabilities, out of which there will be two chances that we can make profit.
07:16And when a momentum candle is formed at the time of breakout, there are high chances that the price will move directly upwards from here.
07:26Here the breakout candle is a momentum candle, but this candle has closed just above the resistance level.
07:33If it had closed a little higher, we would have entered the trade on this candle.
07:38But here we have to wait for the next candle.
07:43After the momentum candle, as soon as the next candle forms and it closes green, then we will enter the market for a buy position.
07:53One important thing is that when I was drawing this line above and below the consolidation zone,
08:00I did not tell you the name of this chart pattern, because there is nothing in the name of the chart pattern.
08:06The fundamental principle of breakout is that first there should be consolidation and then breakout.
08:12When a momentum candle is formed during the breakout, we will enter the trade.
08:18Now let us know how we will take target and stop loss when we enter this trade.
08:24For stop loss, we will keep the low of the breakout candle as stop loss.
08:30We will not keep the target in fix mode, like 1-2 or 1-3.
08:35In our opinion, doing this is like blocking profit potential.
08:39So, we will use 9 EMA here.
08:42So that we can ride long trades and earn big profits in single trade.
08:48As soon as the price target of 1-2 is achieved,
08:51So we will bring the stop loss to the entry point.
08:55With this our risk will become zero and we will ride the trade and enjoy the profit.
09:01Here we can see that the price has closed the candle below the 9 EMA.
09:08Therefore we will exit the trade from here.
09:12If I had waited for a retest in this trade,
09:15Then this trade would have been missed.
09:18Many traders wait for the retest.
09:21Which according to me is a loss deal.
09:25Because most of the time when the momentum candle breaks out,
09:29So the price does not come back for retest.
09:32We get to see huge profits in such trades.
09:36For this reason you keep waiting and the price target is given and the seller leaves.
09:41How did you like this video, please tell us in the comment box.
09:46Also tell us on which topic you want the next video.
09:50We will make a video on the topic which gets more comments.
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10:02Jhaal
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