Home Trading Strategies How to Avoid False Breakouts (Most Gurus Will Never Tell You)

How to Avoid False Breakouts (Most Gurus Will Never Tell You)

How to Avoid False Breakouts (Most Gurus Will Never Tell You)

hey hey what’s up my friend in today’s episode right we’ll be discussing on how to avoid false breakout I know that hurts right now it always you know getting hot on a false breakout so so let’s talk about this so here’s the thing right whenever the market breaks up higher there’s always this thing in you that tells you it’s time to buy buy buy buy my friend and then you buy the next thing you know the market reverses and you get stopped out okay so the lesson here is this is that whenever you notice the market makes a huge rally a huge break out you know Kendall’s up the candles they are strong they’re bullish right it probably means it’s too late to enter the tree okay and here’s why when you buy right after the market has made such a huge move in a short period of time the first thing your income do is there is no logical place to put your stop-loss right because the market made such a huge move right if you wanna set a proper stop-loss right you gotta look laugh and you realize that the previous swing low is so far away so this there’s no logical place to put your stop loss because the nearest market structure is so far away from your entry price so what would traders do your say brainer the price is going higher I would just you know get them bought the train in and quickly exit for a quick profit yep that is their mindset all right all right that is my mindset previously when I was trading in my early years and they would buy and when would they put your stop-loss they did no risk management they know they have to put a stop loss so what I do is they just set their stop loss at any random level right let me know 50 pips away from my entry or two or three or dollars away from their entry if you’re trading stocks and then what happens well after market make such a huge wave up higher it needs to pause he needs to retrace right so the market pulls back and each their stop-loss anyone there man why does this always happen to me well this because you set your stop loss at a ridiculous level because you are chasing the markets all right so this is this is how traders ready to get caught on a false breakup they keep chasing the market so now what should you do that right how should you treat breakouts day well I got a couple of tips for you number one don’t chase breakouts instead right for the market right to show you signs of strength what do I mean by this all right so for example I know you know you’re locating your your support resistance level let’s say you want to buy breakout you’re targeting the resistance level don’t just buy break up out of resistance because not all breakouts are created equal the type of high probability breakups that you want to treat a dose that shows you a sign of strength for example right you see a series of higher lows coming in to resistance so if you imagine that right that looks something like a ascending triangle the price is keeps approaching resistance however every time he bounced away he forms a new higher low approach resistance bounce away a new high low and then approach resistance once again so you can imagine it imagine that there is this coil over here forming a resistance right telling you that buyers are willing to buy at this higher prices and this coil cannot hold on forever so what usually happen is that more often than not the price breaks out higher as the pious keep coming in and these higher prices and eventually right the market cannot take it anymore and it has to break out and chances are more often than not it breaks out higher so those are the type of breakup traits that you want to trade right is what I call again this one it’s a sign of strength right looking to buy breakout of resistance you want to look for higher lows into resistance and you think about this right your stop-loss now can just be below right the previous swing low so if you imagine right there is a series of higher lows into resistance you can set your stop-loss just below the previous swing low or even right you can actually connect the lows together and form somewhat of a trendline and it has set your stops right be low this trendline so can you see that you know if you don’t chase a market if you let the market show you signs of strength you now have much more you have a logical place to set your stop loss okay so that’s the first thing right look for a sign of strength right to buy breakouts and if you are looking to shot breakdowns then look for a sign of weakness and it looks something like you know a series of lower highs into support otherwise known as a descending triangle so now the second technique that I want to show you with you is what I call a build up so a bill abra is basically a tight consolidation that you see on your chance so often traders ask me hey Raina how many candles is a built up man it’s pretty hard to give a number but if you really want to put a gun in my head and ask me I was in look for at least a 10 candle buildup where you know it’s a very tight consolidation no chance all right and is a range of at least ten candles so if you see a build-up and resistance what this tells you is that the buyers are willing to buy at this higher prices because they know that the price is at resistance right this is an area where technically sellers should be around right and the price you know come down lower from it but if you see a build-up and resistance is telling you that buyers are willing to buy at these higher prices and this again is a sign of strength okay and when you look for a build-up to form right again you can now set your stop-loss below the lows of a build up we have a reference point that you can use to set your stop loss and another quick tip for you is that if you want a trick build up what I realize is that the market can really go in either either direction up or down but if you are trading with the trend emitting you’re trading in an uptrend prices at resistance there’s a build up form what happened more often than not is that the price tends to break up higher as well so in other words right you also want to take into consideration right the trend of the market is that you’re in okay so these are a couple of techniques around that you can use to avoid false breakout I hope it helps and with that said I’ve come towards the end of today’s episode if you’ve enjoyed it hit that thumbs up button subscribe to my youtube channel and I will talk to you soon you


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