The PERFECT trade entry: World Champion explains his EXACT breakout setup!

The perfect breakout setup. Entering the market at exactly the right moment and witnessing a really nice shakeout of market participants. Who wouldn't want that? The truth is, unfortunately, that very often we enter setups and simply nothing happens. In most cases, we even get stopped out. Who doesn't know that feeling? You enter the market above supposed highs or lows, expecting a dynamic move, and it just doesn't happen. And today I'm going to show you exactly why that is and where breakouts are actually effective. And if that sounds interesting to you, pay close attention to this, because it's really, really important. Dear friends, there are often strategies, especially breakout trading strategies, that are presented as having high hit rates. Super setups. These will always make you win. And that's exactly what we want to take a closer look at today. We want to see when such setups actually make sense and where they might not make sense. Above all, I want to raise your awareness about where you can use these setups. I can tell you, it often really annoys me that such extremely high hit rates are used to create hype. Because one thing is the truth. Take a look at my video on risk management. These setups usually have very little to no risk reward ratio at all. That means your chance might be high for a brief moment, but are you really ready to pull the trigger at exactly that moment and immediately take your stop loss? If it doesn't work, work out. That's the problem with breakout trading. And that's why let's take a look and approach the whole thing from the other end. Aren't there locations where breakout setups actually make sense? And when these locations are reached, which setup should I actually use? Let's get to the bottom of this. This picture here reflects exactly what I mean. Let's take a look at the following. We had previous lows here. The market experienced a sharp downward collapse from a weak structure. We have a gap opening followed by a long range and a sideways phase. And now the market is making a new low. Take a look at the reaction. It's, let's call it, rather calm at first. Now the market is making another low. These are often the points where people are told, wow, here comes the final breakout. This is supposed to explode. Tricky, isn't it? Now the market is making another low. And again we see that the market very quickly returns to the entry price after dropping below the low. So is it really effective to trade breakouts at such lows? And why isn't it working right now? That's exactly what I want to show you now. Let's dive deeper into the market and take a closer look at the whole thing. Markets have so called balance phases. These are these phases here, and so called trend accelerated phases. These are the specific phases where the financial markets really begin to establish very strong and consistent trends. So what does that mean for us? For us, it means that we should first identify which phase we are currently in at all in the current market environment. And this example that I just showed you is happening right here. This is not happening at an extreme point, but when we take the time to examine the data over a much more extended period of time, we can see that this is unfolding and taking place just before an exceptionally significant and interesting low point in the cycle. Let's go back and look at that once again. This price range here that we're seeing right now is exactly what is happening right here. So if I'm not able to identify whether volume is really dropping off, and if you expect a real sustainable accelerated market phase, it's difficult to say exactly where the real breakout will happen. Now, for example, you can see here that these are all weekly profiles. And these weekly profiles have what are called fair price levels, which are within the value area, and below that are the unfair prices. And these unfair prices are always used by the major market participants to try to get back to the fair price level as much as possible. And so you can see here, we are currently in an unfair price level. Yes. So the probability is there that the market will try to move back into the fair price levels. Therefore, it makes no sense at the moment to desperately look for a breakout here. However, if the market breaks below this level and there really is no more liquidity here, all of a sudden you have a price area where it's open season. And on top of that, if you look to the left, you're in an old market environment where there is initially no resistance because the market participants here are happy. And the probability that the market will now trade through the value is definitely there. Let's go back to our magical setups. These setups, for example, I have a 1, 2, 3 with a lower low. Oh, right, I already had that here as well. You can throw those in the trash because they won't help you if they're in the wrong price range. Now let's take this analysis just a little bit further. Let's take a much closer look at exactly what happens when we encounter such a specific breakout setup, just like the one we would have seen right here. And when the market quickly dropped back down below that level, what Other indicators or details can we possibly add to all of this to make it clearer? For example, we can say that if we want to use such technical setups for ourselves, we also look at the market speed in the order book. Then we already have the opportunity to see whether this movement that is developing there is firstly, dynamic. Secondly, is it characterized by large volumes that are really being pushed dynamically into the market. In addition, there may be big orders or something else here that causes the market to really want to move upwards. If that's not the case, then it already becomes difficult. That means, for me, the result is that technical setups like the one here, you must always remember that whenever you trade breakouts, you need to have plenty of clear space to the left, as we have just learned why this is so critical. In addition to this, these breakouts should ideally be accompanied by the right kind of order flow. Once you have these elements in place, you will truly have a significant trading advantage. Let's take a look at something else. We can use that as well. And in my opinion, that's the royal road. If we have prepared and identified zones where the market is still being held up, because there is a price area from the past that is likely to be rejected. At first we can pinpoint where, for example, there are price areas where the markets can really fall out of balance. And now let's move on and take a look at it in the footprint chart. Let's assume we're here. This is our price area. The market moves up here and we have the information up here are unfinished auctions, meaning incomplete auctions. Liquidity was accumulated and rejected, and now comes the second run. If we have this story, then we can actually make use of a technical pattern that is forming right here. For example, at this point, we now have a strong candlestick followed by a brief pullback, and then another strong candlestick appears with the definitive confirmation that we have a very clear and unobstructed path forward here. Because we know for a fact that we are currently at a highly significant and interesting price zone, based on our comprehensive market profiling analysis, for example, where we clearly understand that the market will also likely break away at that specific point. And on top of all that, we have solid proof right here that substantial liquidity was also actively being sought out up in this particular area. And now, last but not least, the orders are actually being hit into the market accordingly with momentum and with substance. And now you really have an extremely high hit rate, but again, only if you know first it is a specific price zone and territory where with an extremely high statistical probability, there is no resistance. Second, I have clear and definitive evidence that market participants up here were also actively interested in engaging in further trading activities. Third, the detailed order book clearly shows me that when the market finally reaches this specific area, those buy orders are actually being routed dynamically into the live market. In this particular case, if we truly want to go long and successfully trade a breakout and then you see before it breaks out, you have the information here that the order flow is really working in your favor in a substantial way. With the proof that the probability is high that the market will actually move in that direction, and with the logic that we really have room to move up here, this is a real breakout trading setup with which you can make money, with which you have a high hit rate. The last point, which is very important to me is the risk reward ratio, the probability to the upside. Let's assume the breakout happens here. The likelihood that the market will then explode and move extremely far is not that high at first, because most market participants, when they reach extreme areas, also start to take profits. This means that with breakout setups, you often have risk reward ratios that are not greater than 1 to 1 or 1.521. That means the high hit rate is usually not accompanied by a high risk reward ratio. And you can also address this through order flow by observing when market momentum drops off. That alone is not proof that things are reversing, but you need to check whether the exact opposite of what aligns with your trend direction is actually happening, happening there. If that's the case, you need to exit immediately. This means that with breakout trading, defining your target is often not so easy because it frequently happens that the market quickly reacts in the opposite direction. Therefore, breakout trading is the ultimate level. It's really awesome, but only if you know the price zones. If you can read the dynamics, and if you have proof that the probability is high that your breakout will actually happen. I hope you enjoyed this. If you did, leave me a like, and I'm happy to be able to keep sharing lessons like this with you here, thank you very much.