Hey hey: what's up my friends, so in today's episode it's all about breakout trading baby. So what is breakout trading about? So let me explain so breakout trading is a trading methodology right that seeks to buy when the price breaks out of a specific price structure. It could be a breakout of a swing high, it could be a breakout of resistance, it could be a break out of a range so as the price moves a certain amount in your favor in your direction, that's where you enter the trade and that's what breakout Trading is all about you're buying, as the market is moving in your intended direction compared to a pullback where you're buying as the market is moving against your intended direction. So a breakout is when you're buying when the market is moving in your intended direction, and the first thing i want to talk about is how not to trade breakout, okay, so here's how not to do it so often right.

I see many traders all right on social media where they post a chart and they the chat, is really bullish. Right, like you know, five green days in a row, you know boom boom boom boom boom right five green candles in a row. The price breaks out of resistance and they they buy because they're thinking to themselves right man, look at that shot. It's so bullish right.

It's going to the moon right! It's going to a thousand dollar price target time to buy and they chase such breakouts. But the problem with this is: what's the problem with this two pro two things right number one: when you chase such a breakouts, there's usually no logical place for you to set your stop loss. Okay, so this means you're going to set the stop loss at a random level where the market doesn't respect, and this brings us to problem number two when you chase the market. What's going to happen is that this is when the market is about to make a pullback or even a complete reversal, and if you set uh nonsensical stop-loss, as i mentioned earlier, you will likely get stopped up on the pullback or the reversal.

So this is why i suggest right when you look at the charts, if it looks really bullish. If it looks like you know, it's going up every single day. You know today it's more likely to go up again as well. If you're thinking along those lines just hold your horse and tell yourself right, don't chase such breakouts, because this is really tricks that you want to avoid.

So now you might be thinking okay right now. So how do i trade breakouts, then? So one tip that i have for you is that if you want to trade breakouts, look for this specific thing right. I call this look to trade breakouts with a build up. So, let's talk, for example, market is the rich between these highs and this lows.

The price has now approached the highs of the range okay. So if, in the past right, what happens is that if the price you know has five big bullish candles coming to resistance and breakout? You know that such breakouts you want to avoid, because you know yes, move too fast and too soon. What you want to do. Instead is to watch the price approach resistance and you don't want it to break out just yet.

Instead, what you want to do is to form a build up to form a tight consolidation. So imagine price is at resistance and it starts to consolidate very tightly for the next 10 candles. So you know one two, three, four, five, six, seven, eight nine ten candles just at resistance consolidating very tightly. So this is good right, because this to me is a sign of strength, because what it's telling you is that there are buyers willing to buy at these higher prices in front of resistance and the fact that it didn't reverse down immediately from resistance.

Tells you that you know there's some buying pressure willing to hold up these higher prices, so what you want to do now is that if you notice a buildup, that's being formed at resistance now you can look to buy if the price breaks out of resistance and Your stop loss now right has a logical level. You can just set your stop loss below the low of the build up. So this let's say this is the build up. Your stop.

Loss can just go below this low over here and that's a logical level for you to set a stop loss compared to you know, setting your stop loss below the low of the range, which is so much wider okay. So this is what you want to look for: look for a build up before, or rather to trade, a breakout with a build up. So you know the entry point is very simple: when the price breaks above resistance, you can go with a buy, stop order or you can look for a break and close above resistance and get long. Your stop-loss is just you know, below the lows of the build up: okay and uh, to give it some buffer.

You can set your stop-loss one atr below the lows of the build up. So now the question is, you know, let's say the market breaks out. You have a proper stop-loss, where do you exit your winning trade so in such market conditions? Right, i like to trail my stop loss, because if the price breaks out of a range there's a good chance that this could transform into a new uptrend right. So i want to trail my stop-loss right and to write this new uptrend as much as possible.

So a very simple technique that you can use is you can use a tool like the 50 period moving average. So as long as the price is above the 50 period, moving average you hold on into that position, when it breaks and close below the 50 period moving average, then you exit the trade. So that's one way to for you to you know, capture trends right when the price just break out of a range okay. So so that's pretty much it right and before i end today's session, i also want to share with you the pros and cons about breakout training.

So the process is number one. It will guarantee right that you will catch every trend in the market out there, because you're buying, right as the market breaks out of a swing high as it breaks out of resistance. So you can also apply this concept, not just in range market. You can also apply this concept in trending market.

Let's say the market is in a strong uptrend. It doesn't make. You know much of a pullback so when it breaks out of the swing high, that's an opportunity for you to also you know, get on board the trade and to write that up trend. So the pros is that you know you are almost guaranteed to catch.

Most of the trends out there, the cons right. The downside to this is that you know when you trade breakouts. There is always the possibility of a false breakout, no matter how sexy, how good that trading setup setup looks like there's always a possibility of a false breakout, and that is something that you must embrace and when you're trading breakouts you're no longer buying low and selling High you're buying high and selling higher, so that's a mindset shift right that you have to embrace as well. Okay.

So with that, let's do a quick recap: number one! Don't chase breakouts! If the price is, you know advanced four five six days in a row, big bullish candles and it breaks out of resistance. Those are traits that you want to avoid number two trade breakouts with a build up. A build up is a tight. Consolidation can be anywhere between seven eight, nine, ten days, consolidation and that's what we call a build up number three.

When the price breaks out - and you wan na write the new trend, you can use a trailing stop loss like the 50-day moving average to trillion stop-loss and write the new trend, and that's pretty much it right so with that's it. I wish you good luck. Good trading, i will talk to you soon. You.