Trend Line Breakout Strategy

A free video tutorial from Jared Passey
Teaching Forex Trading since 2004
Rating: 4.6 out of 5Instructor rating
2 courses
28,056 students
1-5 Trend Line Breakout Strategy

Lecture description

This is one of my Gold Nugget trading strategies. It is simple and powerful. This strategy is a bread-and-butter strategy that you can always find trading opportunities with. If you follow the rules clearly in this video and the accompanying PDF. You will see a dramatic difference in your trading results.

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14:38:47 of on-demand video • Updated January 2020

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All right. Welcome back to our trend's module training. This section is on breakouts trendline breakouts. There are some clues that I have developed over the years that tell me when is most likely for a trend line to be broken out of. And give me the best opportunity or location to place a trade. Now this is a little bit more than technical analysis. I'm actually teaching you how and where to place trade so this is the first strategy you're going to learn in this series in this in this whole training program and I'll tell you what. This is my bread and butter using trend lines and trend line breakouts is is really I mean that's where it's at There's a lot of really cool strategies I use that I've developed that I've used from others that work well now and then but the trend lines and understanding when the high probability of trading them when they're breaking out is really a key. So I've marked up a few charts that give us example of the different types and ways. So you'll have plenty of examples of a trend line breakout trade. So in our earlier video on trend lines and trend line placement this is a downward trend. And so we place our trendline on the top of a downward trend to designate when it breaks through that it'll change into an upward trend. So that's what we do. We've got a high point here. We've got it riding a high point here at a high point here. Got to that point right here is writing again. The market's losing its downward momentum. That's also a clue that the market might be shifting direction. Now my rules for trading a trend line trend line breakout are that the market has to hit at least three times one to three this time we've got four. So that's good. That's bonus. OK four times the next rule is as I will have to wait till it their tests the market or retest the market. So what that means is if I have this downward trend this top trend line and the downward trend in the market hits that and hits that and hits that this is the test. I mean backup this is test number one where it didn't make a lower low and it came back up. OK. So that's kind of showing me that we've changed out of the mindset or out of the downward trend. We're starting to get out of this downward trend starting. OK we had a video on when trends change directions just recently just before this. This is clue number one that we didn't make a lower low. OK so I've got three points. That's rule number one clue number one is I'm not making a lower low and I come back up. So this is a this is it. This is what I call this is a test this is test number one in the market. OK I have to have a test in the market for me to place a trade whether it's a before a test or an after test. So it's tested before it breaks out or retest and I'll show you the difference on different examples. Ok this example is just like this example. OK I've got this low which corresponds with this one. And then right here it didn't make a new low. So that's Cloonan number one. OK. And it came back up and retested after that. So here's that made the low came back up didn't make a new low and is testing the market here. All right. So what I can do is because it's testing the market ahead of time then it's bounced off of that right here and it's coming back down. That my rules say that as soon as it breaks out of that trend line with any bit of volatility but a volume gain not the first pip. But you know to scale this is a one hour chart so I might wait for 10 or 15 pips to make sure that it's committed to breaking out of that trend line that I'm going to get it going long. So if it breaks out of here I'm going to get in at maybe this level. All right. So let's see what happens. Walk this forward hit the 12 key on your keyboard to move the chart for one at a time. OK there's 10 or 12 pips hesitates. So if I were to get in right there I see that breakout taking its time making me nervous hesitates a little bit comes back down but my stop loss on this trading strategy would be to put a stop loss down below the most recent high. So it would have to be below this section right here so my stop loss is going to be right about there. And I'm going to be going for at least that much. Never have an upside down stop loss to where you're risking more than you're going for more than you're expecting. That's part of the money management section of this trainings so let's keep going here. Stop-Loss is still safe. Bill stopped me out but we got this tent trendline break out. It broke out. It went up again 50 pips before it came back down. So this here if you're seeing this come in here this is part of the trade management. This one stopped us out if we were to state it too long. How long were we stay in it. Well what were we going for. If we were risking 59 picks we should have gone for at least 59 pips and we didn't get in on this one. OK. But those are the rules. And you know you got to get over the fact that you're not going to win every trade too. OK. Those are the rules for this trendline breakup. It has to have three points. It has to tested either a tested line ahead of time or after. And you can trade it after the test. And then you put your stop loss down behind the most recent high or low depending on which to say which way it's breaking out. All right. So let's look at the next one. Here's one on the US was frank. We've been going sideways a bit here. The market starts trending down. We've got one two three four points OK. It's it's got a low here. It comes up in tests it comes down makes not a lower low. Tested again. So we're looking at you know sticking these wicks up here trying to test it out. So it's put trade about right here say once it's really confirmed that it's going to go out you can put a pending order. And let's see what happens if 12. Sure enough we get triggered in right here Stop-Loss would be down here below this low here. So it would have to change back into a downward trend to get us out. So with that we've got about 60 pit stop loss that's 35 pit stop loss so we'd be gone for at least 40 pips here. So there's 48 would be piece of cake. But let's see what happens. Sure enough it gives us 80 pips. So doubles our take profit are for our stop loss that we could have gotten. So if you get out with 45 or 50 pips great. OK. Don't think you're going to get all 80 every time. That's certainly not going to happen. And then sure enough we change back into a downward trend. We get one big motion comes down flirts with our stop loss but by this time you should have taken profit or moved your stop loss up and that's part of the trade management program that we'll learn about later. OK so next example. Now this one tested ahead of time didn't make a lower low and then broke out OK. So let's look at the pound dollar. Sure enough we've got a real nice trend line here. Ding ding. You know it's like riding it along here. That's a good sign. Tag's it here pokes through a little bit. I have to adjust my trend line to line up with the main theme of this. The main angle of this trend line tags here tags here. So I'm looking for a downward trend because I'm expecting this to break out going south. Here's my top it is the top of the move downward trend. It's bounced off of that. Looks like it might be testing. Sure enough it's bouncing off a ways so there's my test comes back down. If it breaks out I'm going to get in right here. And I put a stop loss here of this high k right above this high here. Maybe a little bit. Give me some buffer room. So if it breaks out I might get in here and have about a fifty five pit stop loss and I'm going for at least 55 probably 75 or 100 pips. So let's put it right there above that psychological barrier. So I set this trade up when I go to bed see what happens. Sure enough we get this this test. So it bounced off there didn't make a high. So that's the test breaks out. We jump in here. Our stop loss goes in our take profit goes in. We went to bed. Wake up the next morning with 90 pips in our in our account because it broke through that trend line and it gave us a lot of clues. I had good touches on it and it broke through pretty strong. All right. Let's look at the U.S. catalyst look at a different kind where it tests after OK. So here we've got one two three points in an upward trend. Right here it's going to it's not making a new high let's see what we have here. So this was actually tested ahead of time step came down and then this one actually came up and retested this market. OK. So it tested here broke through went sideways and then retested. OK this is the test when it breaks through and touches on the other side is a retest. All right. So if you got in here going short you put your stop loss above here you lost because it came up and retested. One of the clues one of our rules for placing stop loss is putting it behind where the market's been recently. OK. So the market has been here recently so I stopped last up here with the train here you've got about an 80 pit stop loss but what are we going for it is a four hour chart. So 80 pips isn't as much as it was on a 15 minute chart. So we'd see that and we'd say OK if I got in on an 80 pit stop loss I got in right there. I have my stop loss up here at the top right above that high so that if it come back up and touch that again it have to go into new territory up long to get me out. Sure enough it didn't quite make that. We still haven't gotten myself into profit if that's 80 pitch going down. I want to put you know 150 pips going or 80 pips Stop-Loss. I want you know a double That was 160 pips take profit and let's see what happens here hesitates. We're just going sideways for days. It finally did hit our take profit but I wouldn't have stayed in that long. I would have recognized this going sideways. I would have locked in my profit at a certain point as part of my trading rules once I am up over 60 70 pips on a trade I'm going to lock in my profit depending on the scale I'm trading. But it did take time but it did get down in hitcher hitcher take profit level. If you've got the patience to watch that but that's the retest that's where the market breaks out. And then retests. OK here's one on the Australian dollar markets going down comes up test a couple of times goes down makes a new low touches it comes out and makes a new low touches it ok and breaks out so it comes up and breaks out and then it gets to retest here and this and actually retested a couple of times and then went long. So you can see how the markets play on these trend lines. Some people only take trendline breakouts that are retest ones instead of trading them when they break out. There's a little bit higher probability of success if you're trading on a retest and you get a better risk reward ratio. Now what that means is that if it's bounce in here and you break out a lot of times it's going to retest. And so if you're going along is it better to go from here or from here. Or from here OK. If you're putting your stop loss down here you're getting fewer pips in the move from here. Say we get to hear you get more on the retest here and even more on that retest. So being patient and waiting for the retest can be a benefit. Either way you have to wait for it to either test or retest. If you're going to follow the strategy I put together a lot of people don't have those rules and they just wait till it breaks out and then they get in. And there's no test there's no qualifier to give them the probabilities of a more accurate trade. And so that is the basis of a trend line breakout test trend line breakout trade whether it's testing or retesting is the same thing. All right. And our next video we're going to do is a short one on trading in a channel. So hang in there. We'll be back in a second.