Why I STOPPED TRADING Breakouts! #forex
all right what's up everybody i recently completely stopped trading breakouts all except for one pattern which i'll talk about later and my win rate has gone up very dramatically since then since i started trading i would usually have around a 50% overall win rate and now over the past couple of months i'm usually around 70 to 80 so this is a very very big increase the big jump isn't only from this change i've made a lot of other modifications to my trading also but i would say removing regular breakouts from the list of patterns i trade probably had the biggest impact the main problem with breakouts is that when there's a really big quick change in price there's almost always some sort of price correction or pullback it's very rare that price will go up quickly and just keep going up from there also depending on where the breakout happens it can also end up being a fake out causing a huge sell-off and quickly reversing into the other direction this used to happen to me a lot and it was very frustrating to have so many losses because of it what i do now is i trade almost all of these breakout type patterns as a trend continuation instead there are really only four things that can happen when you see a big breakout bar once you know what could possibly happen it makes it much easier to know what to do while you're actually trading these patterns in real time so i'll show you a couple i'll show you what these four different things are go over the strategy you need to use while trading each one and then we'll look at some of the recent world examples of these happening so scenario number one when you see a big change in price the best thing that can happen is that it keeps going up very quickly with little or no correction this is called a parabolic move and that's when a move and price will go up and just keep going up these types of moves you would never enter these while the price is going up because there's no good way to actually gauge where we'll end up going instead you would trade these as a reversal these work very well because price can only continue going up in a straight line for a limited amount of time the win rate on these patterns is very high for this reason and this is actually one of the patterns i trade all the time this is called a parabolic top so in that situation you would wait for the first solid top to form give it time to put in at least a double top of some sort and then enter the trade usually at the second color change bar that is the safe and easy way to make a profit from these big fast moves upward also one of my favorite patterns to trade the trees usually finish in just a couple of minutes 5 10 15 minutes 20 minutes at the most which is always good so let's go ahead and look at a real world example of this happening this trade was from march 18th which was last friday on the usd jpy during the london and new york crossover session so you see we had this really big move up here puts in a double top and then comes back down so let's see what that will look like in real time so you see we get our first really big move up right there you wouldn't touch anything yet and it's continuing continuing to go up continuing to go up continuing to go up at this point we know uh that is it's gonna continue going up really fast now it's definitely in a parabolic state here since it's so far away from the emas we have our first color change bar there and now we have a double top a really shallow double top and we have two color change bars so you could enter into a trade here and you would put your stop loss up here and then your take profit would be kind of guessing here at it using one hand to hold the mic and then yeah somewhere down here would be your take profit whatever whatever two is that looks about right all right so that's where you would enter the trade and you see the trade will go through right there and i believe that took uh maybe 20 minutes 20 minutes to go through that's if you went for two reward if you went for three reward uh that would be around here somewhere so see if we let's see if we'd be able to get that too we'll be able to get three reward two uh four four reward is probably asking for a little bit too much usually you would go for two or three at the most and you see that the difference between two reward and three reward was really like five or ten minutes so in this example uh it's usually not like that but in this particular example three reward would have been the better of the two but two reward is always good so then we have scenario number two this is the second type of pattern you would be looking for once you see a big breakout bar and that is the consolidation trend continuation you will you want to wait until you see a tight consolidation of two or three bars it can be more than that it really doesn't matter as long as they stay within the consolidation zone you would then put your buy stop order above the consolidation zone and if the price continues up past past the consolidation you'll automatically enter the trade and take profit at least to reward from your entry the reason that you use a buy stop instead of a market buy order here is this could turn out to be a retrace train continuation if it goes down under the consolidation area or it could even be a fake out completely into the other direction and in those two scenarios you wouldn't you wouldn't even have been entered into the trade in the first place and you could go on to enter in one of those other patterns instead this is a quick and easy way to avoid losing trades for no reason very high win rate on these also and they're very common you'll see these happen pretty much every single day and let's go ahead and look at a real world example this was on march 17th on the nzd usd pair a little bit before the london session open which i honestly advise against trading before the open but as an example of what the pattern looks like this is a really good one so we'll use it for demonstration purposes and of course if you actually did take the trade it would have worked anyway uh so let's go ahead and do the replay see all right price is consolidating we have our first decent size breakout bar there now we got our big breakout there and this is our consolidation so you would enter the trade here you place your stop down here and then your take profit be right in here somewhere alright so let's see how that would play out all right the trade would go through right there uh so that took took about 45 minutes almost an hour so really quick easy trade there most of these trades especially trend continuation trades usually go by pretty quick they usually take less than say less than an hour and a half pretty much every time if you go for three reward it'll take usually a little bit longer usually more like two hours but yeah with these uh trend continuation moves you usually can go for three reward i almost always go for two rewards just because it's it has a higher win rate and it's faster it's easier i'm less worried i don't like to lose trades for no reason so three reward you'll probably ultimately make more in the long run but to reward is just a little bit to reward is a little bit less stressful and you'll you'll maintain a higher win rate overall that's usually the way that i like to go moving on to scenario number three we have the retrace train continuation this is also a really good outcome and usually this pattern will get you the most amount of reward compared to all the other patterns you've got the breakout momentum in your favor and since it pulls back so far it gives you more space to get gains from the way this works is you have your big breakout a small pullback and then another big move down you then want about a fifty percent retrace back towards the top of the pattern usually you'll get a small consolidation when this happens you would set your entry right below that consolidation area and set your stop loss right above it this pattern can easily get you at least three rewards most of the time if not four or even more than that but you can always go for true reward to be on the safe side extremely high win rate for these patterns also very common and one of the easier trade patterns to get into since they form they form kind of kind of slow so this gives you a lot of time to decide where you want to place your entry so let's look at a real world example this is actually just a little bit before the last pattern that i showed you on the same pair the nzd usd so let's go ahead and look at the replay so we have a really really big solid move upwards we got our first color change bar first top and we get our second color change bar and second top there so this uh this move upward is a little bit too strong for me to for me to want to enter this as a parabolic top although it is a parabolic top and i believe it does end up working but i would i would wait for a little bit more of a pullback here so we've got our big break down it'll move back up and then we get our giant breakout there so what we want to look for now is a 50 percent retrace back up towards here okay so we have our 50 retrace we got two color change bars this should be a good place to enter here so you go ahead and put your cell stop underneath that small consolidation we have and you put your stop loss up here actually since the trade hasn't triggered yet we can get an even tighter entry here we'll keep our stop loss up there all right so the trade would have would have triggered by now and then uh let's put some take profit let's see two two reward would be here and three reward would be right about here i would measure it i just don't want to have to put the mic down so let's see these are probably about right though okay well it actually went two and three reward at the same on the same bar so uh but like i said these retrace retrace train continuations almost always go three reward probably more like four reward so let's see if it actually ends up going that far too yep okay so in the next in the next 10 minutes it actually ended up going for reward these uh these like i said these are the highest uh these will give you the highest risk to reward ratio compared to all the other patterns so if you see a retracement continuation you can almost always go for three reward so the final thing that can happen when you see a big breakout bar is actually the worst thing that could happen and that is a fake out i'm sure this has happened to you before you see a big breakout move and decide to get in only for it to reverse hard in the other direction and cause you to get stopped out of your trade this pattern is actually what made me stop trading breakouts in the first place and it's the reason why i ended up doing a lot of research and back testing to come up with a solution to get around it basically the fake out is the reason this entire video even exists but there are ways around it so let's say you have a nice breakout into consolidation shrink continuation pattern like this one here you'd place your entry below the pullback consolidation area and stop loss above the consolidation area as usual the trade triggers and starts to go through you get into a decent profit and then all of a sudden the trade reverses very convincingly into the other direction and you end up getting stopped out of your trade very frustrating i know but through a bunch of back testing i discovered that this almost always means the trade will continue going in the other direction usually for about four reward worth of pips so what you can do is enter a new trade in the other direction once you see a proper entry pattern either another consolidation drink continuation or a retrace and you'll most likely end up winning the new trade and the other direction this works most of the time but only attempt this with big momentum swings if the price slowly reverses in the other direction it's more likely uh just another pullback instead of an actual fake out also i would limit this to just two attempts you lose the first fake out trade you can try for a setup in the other direction if both of those fail i would say that it's time to forget about that move and wait for something else if you do win the second trade you at least get one reward since you lost lost one reward on the fake out and then gained two on the new trade all right so let's go ahead and look at what a fake out would look like in real time so here we've got a pretty slow dribble down nothing really nothing really too exciting yet and we get our big breakout there and then we get our nice little consolidation area so let's say you entered the trade here and we put our stop loss here so see what happens all right so we get a really big bar into the other direction and we actually ended up getting stopped out of our trade there so what you would do now is start looking for a proper entry in the other direction so we're looking for either a consolidation or a retrace and we pretty much have it there so we'd enter a new buy stop here stop loss there our take profit would be somewhere in here all right so the trade would have been entered right there very close to the stop loss but we didn't get stopped out and the trade will go through right there so that's a perfect example of a fake out you would lose one reward on the first trade that you lost and then you would gain back two on the uh fake out reversal trade so you would at least get one reward from that like i said i would i would limit to i would limit it to just two attempts i wouldn't keep trying over and over but this works most of the time especially with these really big momentum swings like this definitely something to look out for try it out for yourself and let me know what happens so those are the four different scenarios you'll most commonly see with big breakout bars if you try to if you try and enter the breakout right at the first bar you will lose so many trays trying to do this you just simply have to be patient and wait for one of these patterns to form instead always use stop orders to even further prevent losses also i do want to mention though there is one type of breakout that you can trade on the first bar as soon as it forms and that is the consolidation breakout this video is getting to be kind of long now so i won't fully explain the pattern here but that is only breakout pattern i feel comfortable entering into right away and it also has a very high success rate as well alright so i hope you enjoyed the video let me know what you think about my strategies or if you have anything to add in the comments i did need a little break from making videos to handle some other things actually still working on my ftmo verification right now but i do plan it plan on putting out at least one video per week from here on out so make sure to like the video and sub to the channel remember to always trade responsibly and i'll see you guys later you
2022-03-24 00:43
