Hey hey: what's up my friends, so in today's training right i want to share with you five things you must look for before you place a breakout trade because here's the thing right. I know that your trading breakout can be exciting right. The market breaks out higher, improve right. You make instant profits right kaching, but here's the thing more often than not.

You buy breakout market reverse and you get stopped out and that sucks okay. So in today's training right, i want to make it less sucky for you right to help you you know, avoid right getting getting caught in the getting caught in the falls breakout, so i'm gon na share with you the five things to look for before you place A breakout trade because if you often find yourself in caught in a false breakout, you know your breakout. Always you know hit your stop-loss isn't working for you. Chances are you're not following one of these five things, all right.

So, let's get started number one before i trade breakout. The first thing i look for is for the market to be in the range of at least 80 candles or more so why 80 candles? Okay? So now here's the thing right, i put here 80 candles. It's just like you know, a rough guideline, a benchmark. If, on the chart it happens to be 78 candle range right, i'm gon na be perfectly fine with it.

Okay, so i'm just putting 80 candles. So it's just something for you to recall easily. If you get like 77 can level 79, it's fine, don't don't sweat over it. Okay and the reason i want this right is because, based on my observation in the markets, okay, is that the longer a market ranges the harder it tends to break.

So if you observe a chart of maybe oil gold, silver whatsoever, if you see that it's in the long term range like for the last five six seven months, chances are right when it breaks out it's going to break out hard. So this is what we want right for our criteria when trading breakout. We want a market to be in a range because the longer it ranges the harder it breaks, and why is that? So there are a couple of reasons for this stops triggered and breakout traders. Let me explain to you what this means.

So, let's say market is in a range. It goes up down up down up down up. What happens is that when the market is in range right, it will attract traders to trade the ends of the range they will. Look to buy low, sell, high, buy support, sell resistance.

So if you think about this right, let's say the market is at resistance now and it reversed down lower and you shot this market. Maybe there's a shooting start pattern. Maybe there's a bearish engulfing pattern and you go short now. Let me ask you: where will you put your stop-loss if you're, like most traders, i'm going to guess you'll put your stop-loss above the highs of the range, maybe somewhere about here above the highs of the range and likewise right? If the price comes down to the low of the range and it bounced up higher, you buy it support, i'm guessing you put your stop loss below the lows of the range, so you can imagine right as the market stays in range right and more traders.

You know look to buy support more cell resistance right. This cluster of stop loss will accumulate right, more and more above the highs of the range and below the lows of support and below the lows of the range, and, if you think about this right, this cluster of stop-loss, what do they represent? Okay? So let's talk about the let's say, a trader who is short right? What what does it represent? So a trader who has shot the market at resistance? His stop-loss right is pretty much a buy stop order, because if you are shot the market - and you want to exit your short position, you need to hit the the buy function right to get out of your short trade. Do you agree so in essence, right for a trader who is short, they are stop loss right. It's in essence, right a buy, stop order, so a buy stop order is actually right, a potential so-called energy in the market that could push the price up higher, because if there's a lot of buy, stop order above resistance, that's a cluster of potential energy that, if The price you know touches it right: it could trigger right, uh, more buying pressure, as short traders scramble to get out of their trade okay.

So that's the first reason reason right stops triggered the longer the market is in a range. More stops will be accumulated at the ends of the range, and, if it's trigger right, it could fuel right, uh buying pressure right if the price breaks above resistance and vice versa right, i could feel uh selling pressure if the price breaks below support. Second thing: breakout traders: what what? What's that about right, so very simple right as the market is in a range right, the longer is in range. The range will get more and more visible to the current time frame trader and the higher time frame trader, and there will be momentum trader breakout traders looking to buy breakout right so they're just waiting for that signal right.

The confirmation, as the price breaks above the highs of resistance, for example, to buy the breakout right and that again right would fuel further buying pressure, and this is why, whenever i trade breakouts, i want the market to be in a range long enough right. At least 80 candles right for me again if it's 77, if it's 77.5 78, it's fine! So let me just walk you through. You know what what i'm looking for on a chart so again, very simple! This is a very, very simple stuff that the 10 year old can do it. So let's say you saw that the market is in a range between here and here.

Okay, how do you know it has been 80 candles? Well, what you can do is calculate each bar one by one till the end of the range, so that is bar number one. This is two. This is three there's four. This is five okay, so you calculate until you have 80 candles, so that's kind of the old school way.

I don't really recommend that, alternatively, right, if you're using trading view, just pull out this ruler tool press this at the start of the range all the way to the end of the range. Let's say this is the end of the range okay, and you see that right now we have about 80 candles for this example. This is about 80.. Okay, that meets our criteria.

We have at least 80 candles in this range and let's say we try for uh how about this bitcoin. Okay, same concept: let's see bitcoin any range portion, okay, so same thing right: what about here from the start to the end right? How many candles are there? So let's say this is the start of the range okay, and this is the towards the end of the range we have about 89 bars over here 89 candles over here, simple stuff right, so use that ruler to make your life easier. Okay, so thing number two, what i look for a build up, so what is a built up brain? I don't get it right. Do i build something up? No, not quite right.

So a build up is basically a tight consolidation. So this is a concept that i learned for a couple from a couple of traders. One of them is a mark minervini. I learned it from a bob bowman as well.

They use this concept. They may not use the word, build up, i'm not sure if they if they did, but this is a concept that i learned from these two traders. So let me show you what is a build up, so pretty much market is in range. It starts to consolidate.

So this consolidation here is what i call a build up. Why are we looking for a build up? Two reasons? Number one: it's a sign of strength. Why do i say that so imagine right, the price is in a range. It goes up to.

Resistance comes down to support up resistance, come down support, go up resistance, and then you know what that if the price is at resistance, this is where potential selling pressure should be lurking. This is where people want to sell, sell at resistance, but if the price can still hold up at resistance, this tells you that hey! You know something is not quite right. It tells you that there is people willing to buy at resistance, even though the price is you know at this high. So that is a sign of strength.

Okay, so again, another variation of a build up could be something like an ascending triangle. Where price make a series of higher highs and higher lows, this is another variation of a build up as well. Okay, so bear in mind, and the second reason why you are looking for a build up is that the volatility cycle is in your favor. What do i mean by this? So here's the thing right volatility of the markets right, they are not static.

The market moves from a period of low volatility to high volatility, et cetera. So, for example, you know market is not going anywhere type volatility day breaks out. Then volatility shrinks again, maybe collapse back lower starts to consolidate consolidate. It makes a huge spike in volatility then starts to consolidate.

You know something like this, so you can see that market volatility it's always changing from low to high and back to low to high et cetera. So let me just show you a quick example. So if you look at bitcoin, okay, same concept right prior to this breakdown here over here, how's the volatility of this market. Well, it's getting quieter notice, the range of the candles, so you can see that volatility that moves in cycle.

It's not always high volatility market condition forever. It's not always low volatility market condition forever. It's kind of like trends right. They come and go all right.

So this is the key thing that we're looking for third thing: what do we look for? The 20ma touches the build up and that's because uh to me it's a signal that the market is about to make a move. So here's the thing right so when i use this concept called the build up right. One of the problems that i faced in my early years of trading is this right. For example, the market consolidates and any forms are built up.

How many candles should the build up be right? That's a question that i keep asking to myself: should it be five candles, should it be ten candles? You know what's the right answer, so this is something that is very subjective, because a lot of it depends on how long the range is, and it also depends right of the price action within the range. So that is something that i struggled for. You know the longest time you know. What's the solution right, how do i know when the market is? You know we're getting ready to break up, because if you think about this right, a build up can be as little as three or four candles, or maybe 10 or 20 candles.

So when do we know it's the right time, so one objective way that i've used to define right when the market is getting ready to make a move is to let the 20ma be your guide, the 20-day moving average or the 20, whatever timeframe you're using right. Moving average to be your guide right, you want to make sure that the 20ma has caught up with the build up right before you, trade, the breakout, so just to explain what this means. If you look at this uh this over here, okay, you can see that we have this built up over here form on new zealand yen right within this range. But how do you know when is the right time to buy the break out of this highs? Well, this is where the 20ma can be your guy just put in the 20ma notice right that the 20ma has caught up with the lows of the build up already it's caught up with the build up notice.

That 20ma has touched the build up and that's a sign right there, hey you know now you can get ready to trade, the breakout. So if you look back earlier in time at this point, i wouldn't be interested right to buy the breakout. Yet at this point, why is that? Because the 20ma has not caught up with the price. This tells you that the market still needs still need time right to store more potential energy okay.

So this is what i look for the 20ma to catch up with the price. Moving on the fourth thing, once you have nailed down one two and three right number four is actually very simple: you can enter using a buy, stop order or simply a break and close above the highs. So i i'm assuming you understand what this is right: placing a buy, stop order above resistance or a break and close above the highs. So let me just explain a break and close above the high.

So what you're looking for is simply for the price to break and close above the highs of the build up. So in this case it's this candle here notice. This candle has break and close above the highs of this build up. So this is another technique that you can use to time your entry.

There is no bears approach. There isn't you know which one is better, whether it's a buy stop order or whether a break and close they are fine, so just go with with whichever ride you are more comfortable with and the fifth thing right, stop loss and exit right. Where do you set your stop loss? When do you exit your winning trade? Okay? So let's cover that right so for stop loss right i like to set it one atr below the low of a build up, okay and for exit. You can use a tool like the chandelier crosstalk moving average etc.

So let me just walk you through this uh, this concept, so for stop loss right. Let's say market breaks out right. What i'm going to do is i'm going to pull out the atr indicator? Okay, i typically use a 20 period atr because there's 20 trading days in a month i use sma just a preference, and what i'm going to do is find out. What is the atr value when i trade, when i, when the the breakout occurred? So in this case, you can see that it's about 60 pips right, so this tells you that on new zealand yen on a daily basis over the last 20 days right, this market has moved an average of 20 sorry, 60 pips.

So what i'll do is i'll find out? What is the lows of this build up over here and minus 60 pips? So, let's assume right that the lows of this build up is uh. 69. Sorry, is it yep 69? I just take 69 and i minus 60 pips right for this uh euro dollar, sorry, new zealand, yen and i get about 68 and 40 cents, so my stop loss will be somewhere around 68 and uh 40 cents somewhere about here. This is my stop loss.

So pretty much i want atr below the low of the build up. Does it make sense? Okay, that's my initial stop loss and, as for uh taking profits, when do you take profit? So again, a very simple way you can use is to use moving average uh, depending on the type of trend that you want to capture you can use. You know a tool like the 50ma okay. So if the price moves in your favor, you exit the trade when the price closes below the 50ma.

So in this case right you will exit when the price breaks and close below the 50ma over here, simple stuff. Okay, so you can see that uh once you kind of you know, understand these concepts right. This steps, one two, three four and five right. You find that your breakout trading is that much improved.

So let me walk you through a few examples. Right of the uh, the things that we have just discussed: okay, uh, so new zealand, yen, okay - i think i just did this perfect example. Here i mean first and foremost right the examples that i'm going to share with you. They are all.

Obviously cherry picked right. I'm not going to be a moronic guy who cherry pick is just to prove that my illustrations or my concepts is wrong. So they are cherry picked right. They are winners right, but here's the thing, the concepts that i share with you are meant for you to validate and verify it on your own.

Don't don't take what i share with you at face value. That's that's! You know. That's kind of gambling right! Take the ideas, the concepts and verify you know to see whether it's rainer telling the truth or is he just a you know a bs fluff guy right. It's all on you! So first thing: first right: new zealand, you know again we are going to measure the range of this uh of this market first so from here to here at least 80 candles generally.

So you can see that over here we have about 70. Okay from the way i draw it right now, it's about 77, 78 right perfectly, fine, okay, next thing, we're looking for is a build up. Number two: okay, which is here a build up. Third thing we're looking for is for the 20ma to catch up with the build up which it has did, which it has shown over here did right number: four we can enter using simply a buy, stop order or a break and close above the high.

So let's say we go with a buy, stop order above this heist: okay and number: five stop loss and exit right, so stop-loss is just simply a 180 year below the lows of this. Build up. Okay and exit could be trailing. Your stops using the 50ma okay.

So, let's say: price uh does break out of the highs. Okay, we get long when it breaks above this high. So if you want to wait for a break and close it's up to you and then you trail your stop-loss right until the price breaks and close below the 50ma okay. So let's move on next one.

So this one is bitcoin. Okay, so again same thing: here, let's see before the breakout, we are looking for the range to be of at least 80 candles, so pull out the range. Let's see how many candles this is from here all the way down to here. We have about 128 bars.

Clearly meeting our rules next thing: we're looking for a build up, okay, so a build up right so over here is the build up this portion here, okay and notice, it's kind of like you, know, a series of higher lows approaching resistance. So let's say this is resistance, then this is the series of higher lows approaching resistance. Great. We have a build up over here next thing, all right.

We want to make sure that the 20ma has caught up with the build up so pull out your 20me nice. All right it has caught up with the build up. So what we're going to do next is just to simply use a very simple entry trigger. Let's say a break above the height right, buy, stop motor above this size.

You go long right and your stop loss is 180 below the lows. So at this point you can see that your swing low would probably be at this lows over here or, if you're, more conservative. You can even set it at this lows. So pull out your atr indicator, let me just walk you through quickly: atr indicator: okay, uh again, i'm just going to change this to 20 sma, okay.

So what we're going to do is to find out what's the current atr value before it breaks out. Well, at the point of breakout, it's fine as well. Okay! So, let's see so uh at a point, breaker it's about 144 dollars, but actually you wouldn't do it right. If you use a buy stock order, buy stop order.

You place a buy, stop order above this highs, for example, finance the atr value, let's say 75, then you find out what's the low at this point over here. So let's say the low is x x, minus 75 dollars and let's, let's say that is y okay. So the y is your stop loss very simple math over here; okay, so that's uh for bitcoin. So let's move on right.

Let's talk another another chart example. So let's say this one again right same concept. I think you're gon na get sick of me repeating over and over again so again same thing. First thing: first identify the range.

How many candles are there? In this case, we have about uh 84 bars, as shown over here right 84.. So this range has about 84 bars. That's perfectly fine. Next thing we want to do is to uh identify the build up, so in this case we have the build up over here and resistance.

The third thing is that for the 20ma to catch up with the build up so pull out your 20me nice, it has touched it as well. Next thing we're going to do is entry trigger it's very simple, buy, stop order above the highs. Fifth thing is: stop loss one atr below this below this low somewhere here and then, if the market moves in your favor, you can trail your stop loss, let's say, for example, using the 50ma or even the chandelier crosstalk. If you want so we use a 50ma right, so we can see that we, you can write this wave up higher as well.

Okay. So let's have a look at a few more examples before we conclude today's lesson: uh, euro dollar. Okay, you know what let's do a more stock example microsoft to share with you that you know examples can even be applied to the stock markets. So microsoft look for the range on this uh market.

Let's say the range starts from here: okay and all the way down here, so this one's a bit short right. This range okay, but still it's about 73 bars. Okay and again, this is the that's number one. We have the range close to 80 candles next thing right, looking for the build up, so at this point we have this built up over here, but just because it has a build up doesn't mean we want to place a buy, stop order immediately, because if you Recall we want a 20ma to be our guy to signal to us that the market is getting ready to make a move so pull out your 20ma nice right, yes, touch d, build up as well.

So at this point, once it has touched the build up, you can place a buy, stop order above the highs of the build up. Okay, so once you touch it, you can place a buy, stop order above the highs of this build up right, then stop loss. 180 are below the low of the build up. We can reference this low 71 atr below it and then, if the market breaks up higher, you can trail your stop loss.

You know progressively again, you can use the 50ma, that's quite straightforward, 50ma or again, you can use the chandelier crosstalk, which is this indicator here. Channel is stopped right. You can see that it uses a volatility in the market to trail. Your stop loss uh here.

Here's how it looks like it looks like this is a blue line over here right, which is uh. You can use to trail your stop loss so similar concept to the moving average, but just the way the math, the formula uh that derives this indicator is slightly different, all right, so yeah, that's pretty much it right. So one bonus tip that i have for you is this before we eco is that if you trade stocks, especially right, sometimes you have too many breakout trading setups to choose from so which do you go for okay, so my suggestion is to focus on buying the Strongest markets focus on buying stocks right that have appreciated the most in price right, because these are the ones right that tend to continue to outperform the market and the way you can rent your stocks is use the 50-week rate of change. So, for example, let's say you have like a 10 stocks that have a potential breakout trading setup and you're wondering man rainer, which of these 10 stocks do i buy.

I don't have enough capital right. I can't possibly be buying all 10., then what you can do is to get ranked this 10 stocks according to their rate of change and focus on buying, let's say maybe the top three stocks right that have the you know the highest roc value. So, let's say, for example, just say: for example, right microsoft is one of these candidates and plus another nine more stocks pull out your indicator called the rate of change roc right and is this a line below right then just uh change this to uh uh uh? 50 weeks, so this is a daily chart. I need about 250 over here, okay, okay, so 250..

So what this tells you is that okay, so there might be some confusion, hey rainer here, you put a 50 week roc, but why this over? Here you put 250 and the reason it's quite simple - from a daily to a weekly right. You need to multiply it by five okay, but if you want to to to do everything on the daily chart, then just change this to a 250 which is in essence right a 50 week roc. So what this tells you is that over the last 250 days on this chart, okay, this market right has - or rather this stock right - has increased 39.68. Okay, so you want to rank all your 10 stocks right according to the uh, in this case, uh 250 period.

Roc, if you are on the daily chart, if you're on a weekly right, then you'll be the 50 week roc, so you're going to rank them according to their rate of change and focus on buying right those with the highest roc values. Because this tells you that these are the stocks that have been the strongest over the last 50 weeks and chances are. These are the stocks right that are likely to outperform the market in the future as well? Okay. So this is just one tip that i have for you.

If you have, you know too many setups to choose focus on buying the stocks that are the strongest okay, that have you know: uh move up the most uh over the last 50 weeks, for example. So, let's do a quick recap right, so the five things to look for before you place a breakout trade number one is, you know a range of at least 80 candles or more. If you have a 77.75 candle range, i'm just kidding right. That doesn't happen, but you get my point right, don't be too anal about it.

Next thing we're looking for is a build up, because this is a sign of strength. The third thing we want to see is the 20ma to touch the build up. So it's a signal that the market is getting ready to make a move number four: your entry trigger could be as simple as you know, a buy, stop order or a break and close above the highs and number five setting your stop loss. All right, which is a 180r below the low of the build up or and then uh.

If the market moves in your favor, you can exit right using the 50-day moving average or the 50 period moving average simple okay. So hopefully you know this helps you with your breakout trading, and if you want to learn more about uh breakout trading price action trading, then i would suggest right. You can go down to my website over here trading with rainer.com over here again just scroll down a little bit. There are a couple of guides to, or rather three guides right, but for this, that is more relevant to you is the ultimate guide to price action trading, as well as the uh monster guide to candlestick patterns right just download.

These two guides: uh click. This orange button here and i'll send it to your email address for free and again right. This will help you improve your breakout trading, your pullback trading and your price action trading analysis in the markets right so with that said right. I wish you good luck and good trading.

I will talk to you soon. You.