How I Avoid False Breakouts (My Secret Technique)

What's up guys, welcome back to another video. In this video, I'm going to be sharing with you a very simple hack that you can use to avoid getting caught in false breakouts. If you've ever been in a situation where the market seems to be, you know, breaking out quite aggressively, and then, you know, you go long just for the market to come right back down and stop you out, this video will essentially teach you how to prevent that from happening. And guys, hello! If you don't know who I am, my name is Xuan, and I'm on a mission to create the world's best trading education suite and to make trading easy for everyone. And without any further you know, let's jump right into the video. And the only thing that, you know, this all boils down to, the one word that will help you avoid getting caught up in false breakouts, is this word called the higher time frame bias. If you have your higher time frame bias and if you do it correctly, this thing alone will just prevent you from taking, you know, not only bad trades, but it will allow you to take the trades that are following the direction of the trend, which is where you'll be able to get much more return for the same amount of money invested. Gonna happen way more quickly so that you're not stuck holding on to trades that are doing nothing and you're doubting whether you actually made the right call or And all in all, like, when you trade in line with the higher time frame bias, this is where trading becomes easy. And I'm going to show you how to do it in this video. Now, before we actually work on, you know, the higher time frame bias, there's one very important concept that you need to understand first, and that concept is a concept known as order flow. Now, I know these sound like very complicated terms, but believe me, they are very simple in nature, and you will understand them really, really quickly. To break down order flow, it's very simple. It's essentially just the way that price is being delivered, and there are only 2 states of order flow that markets can be in at any given point. Either you are in bullish order flow or you're in bearish order flow. Now, why am I not saying bullish market structure and bearish market structure? Well, it essentially is, you know, just bullish bearish market structure, but you'll understand why in a bit. A couple things that you need to understand about bullish order flow is that the highs are always attacked and the lows are always protected. And the other thing that you need to understand about bullish order flow is that sell-side liquidity sweeps lead to higher highs. And this will again all make sense in a bit. So let's talk about the highs are attacked and lows are protected concept first. If you realize in any— when the market is in any sort of bullish order flow, not only do you form higher highs, but you also form lower lows. And let me just see if there is a good example that I can find to illustrate this concept. And I believe I found it. So in terms of how, you know, price action is looking at the moment, you can see that this is pretty much textbook bullish order flow where you're getting higher highs and higher lows. When you're in bullish order flow, notice how the highs are always attacked, where, you know, not only are you not safe if you do take shorts because, you know, these highs just get ran through every subsequent move— all of these highs are just getting taken out— not only are they taken out in the most recent move, but they're also getting taken out on past moves like this, right? When market is in bullish order flow, it's targeting some kind of buy-side liquidity. And buy-side liquidity, just so you don't get confused, any swing high is called buy-side liquidity and any swing low is called sell-side And the reason why they're called buy-side liquidity and sell-side liquidity in particular has a lot to do with general market psychology. And once you understand this, you'll never see the markets the same way again. So I want you to imagine for a moment that, you know, you went long at some point here, and as the market makes this new low here, if you're a normal trader, which is most of us, we would like to possibly trail our stop loss, right? Instead of having our stop loss, you know, continue to remain here, we might move it here, for example. Anytime any sort of swing low or swing high forms in the market, you need to automatically assume that a lot of people are either, you know, moving their stop losses to that area. Or let's say, you know, a lot of retail traders might look at this level, for example, and be like, oh, you know, that's support. And so when the price does come to this level, they might, you know, go 100x leverage, go long or something, and they might place their stop loss literally right underneath this level. All in all, What this all means at the end of the day, all that matters is the fact that above every swing high and above and below every swing low, you have a lot of traders or market participants placing orders, right? The orders are all concentrated around this area. And the reason why this matters is that in order for the markets to go up or down, right, to go anywhere, I sort of want you to imagine the market as like a Ferrari. In order for this Ferrari to go up or to go down, it needs fuel, right? So where does it get the fuel? It gets the fuel by stopping out other traders, which is why earlier on I mentioned that in bullish order flow, not only are highs attacked and lows are protected, but sell-side liquidity sweeps leads to higher highs. So I want you to notice here that the moment these sell-side liquidity here gets, you know, taken out, the market makes an explosive move towards the upside. Now this is where we start getting into, you know, that false breakout thing where You know, if you're like classic support resistance, potentially retail style trader, you're going to look at this breakout of support and you're going to go short here, for example. But you fail to realize that on a higher timeframe, or at least in a bigger picture, price is actually still in an uptrend. This is why this sell-side liquidity sweep led to higher highs instead of being breakout, retest, and, you know, dump. And I hope you're starting to get a little bit of a picture now on how this all works. But let me just show you one other example of how bullish order flow is delivered. And we can look no further than what price on Bitcoin has been doing recently. So you can see that throughout, you know, this bullish order flow, you have higher highs, higher lows. And even when sell-side liquidity does get taken out at this point, a lot of traders actually— I do remember this very clearly— a lot of people went short here. A lot of people calling like, oh, you know, breakout, you know, retest, and, you know, break down. But they failed to realize that the market was still in an uptrend, right? At least on the higher time frame. And they failed to realize that the market was still in a bullish order flow and that sell-side liquidity leads to higher highs. Now, just one other piece of information That might help you, you know, put this all together is you need to understand that in every financial market there are these entities called market makers. And I want you to think of them as the forces that are actually moving the markets. Because let's face it, like all of us retail traders could band together, but we still wouldn't have enough money to meaningfully move the market over a consistent, like a long period of time and like aggressively, right? It's not meaningful enough. We are not enough. We're just fish in the ocean, literally, like quite literally fish in the ocean. And these market makers go beyond even, you know, whales. These They are the ocean essentially. And I want you to also understand that this is going to play into the explanation that I gave you on the fuel thing, which is that these market makers need fuel in order to, you know, move the market up or down. And the markets, here's the thing about the markets. Every financial market out there is a zero-sum game, meaning for every dollar that you make from a winning trade, you don't just make that money out of thin air, right? You're taking it from someone else. It's the reality of the game. And most of the time when you do lose a trade, guess who's profiting? The market makers, and that money goes directly to helping market makers move the markets higher. Of course, this is only the case if they have programmed their algorithms to deliver the markets in a bullish order flow. Now, in a bearish order flow, it's just vice versa of this, right? The lows are constantly attacked and the highs are protected. And when you're in bearish order flow, buy-side liquidity sweeps leads to lower lows. So let me see if I can give you a good example. So over here you can see that the market actually went into a downtrend. So let me give you like an example. So this is how market structure, you know, generally looked like throughout that period. And you can see that every time that you broke some kind of quote unquote resistance, it was a false breakout and the market just went lower, right? Because this has to do with how order flow is being delivered. In this case, this would have been your false breakout and you continue breakdown again once more. Once you take out this quote unquote resistance and, you know, these breakout traders start getting in, boom, right? The market dumps. And these are the situations where you want to prevent yourself from getting into because Ideally, you want to be shorting this, not buying this. And the way that you're going to be able to be on the right side of the move every time is by understanding order flow and by understanding higher timeframe bias, which is what I'm going to get into right now, which is the higher timeframe bias. Now, there is only one thing that you really need in order to determine your higher timeframe bias, and that's key levels. And you also really need to be on the right timeframe. So I'm going to cover that as well. But let's talk about timeframe first, because, well, if you're not on the right timeframe, it's kind of hard to do everything else. When it comes to timeframes, this is— this tends to be a topic that causes a lot of confusion for many people. But the only thing you need to remember about timeframes is the rule of 4 to 6, right? Or factor of 4 to 6. All this means is that whatever execution timeframe that you're trading on, for example, if let's say I like to be trading on the 1-hourly chart, then my higher timeframe in this case is just going to be between a factor of 4 to 6 compared to the 1 hour. So in this case, 1 hour times 4, so Now my higher timeframe is the 4-hourly. But let's say if I'm trading on the 5-minute chart, there are a couple options that you've got here. One of them is going to be the 15-minute chart, technically not 4, but it's 3. Or I can use the 30-minute chart as my higher timeframe, which is a factor of 6. Now the one exception to this rule, I guess, is if you're trading on a 1-minute chart, which if you're a complete beginner to crypto or if you don't really know what you're doing yet, I highly recommend staying away from the 1-minute timeframe in particular. In fact, I wouldn't even recommend going on the 5-minute. A 15-minute chart works just fine, especially if you don't yet know what you're doing, and especially if you find yourself always getting caught out on the wrong side of the move. Like, you do a lot of these like herky-jerky movements, or what I like to call it. It's like every time the market goes down, you know, you start going short, and then market goes up, oh, you stopped out, and now you go long, and then market comes down and you get stopped out again. If you're struggling with that, there's a very high likelihood that you didn't determine your higher timeframe bias well enough. And the lower the timeframe, the harder this higher timeframe bias exercise tends to be. So if you're again beginner intermediate, even for myself, like my favorite intraday short-term timeframe is the 15-minute chart. And in this case, it would be the 1-hourly timeframe as my higher timeframe. I'm just gonna stick with that example that I gave you, which is the 1-hourly timeframe and the 15-minute timeframe to show you this example. So all you need in order to determine the higher timeframe bias is, as I've said before, Key levels, and the way to do this is also really simple. All you want to do is look at price where it's at right now and mark out the some of like the really relevant, like to your eyes, really relevant key levels, right? So I can say that okay, price is currently trading between this and that, and my rule of thumb that I don't want too many lines on the chart to where you know I'm marking out like one blah blah blah blah blah, right? That's too many. Complexity only confuses you. Simplicity is key, and so I want to minimize the amount of lines that I'm drawing on the chart, but I still. Don't wanna draw too little lines to where, you know, like I lose sight of the big picture. So my rule of thumb is that I will at most have 4 levels, but at least 2 levels, right? So even right now, this is good enough for what I need to do. But if you feel the need to zoom out a little bit further, then, you know, do so. For example, this was one of the levels and perhaps you can say that, you know, this is potentially another one. But just so I reduce, you know, redundancy because this level and this level are so close together, I'm gonna mark this one out. But the keyword here that you need to focus on is relevancy. For starters, if I'm trading on a 15-minute chart, right, you need to understand that again, on a 15-minute chart, most of my trades are going to be opened and closed within a couple days max, or at most a few days. Most of the time it tends to be opened and closed within the same day, just to put it into perspective. So sure, like Bitcoin might eventually come down to $60K, but that's not something that's relevant to me at the moment. So you could even say that, you know, this is zoomed out, but it's a bit too far out to be relevant to me at the moment, right? So only do this if you really need, you know, much bigger picture. Otherwise, 2 levels are perfect, right? Hopefully that explanation makes sense to you. Now, let me just zoom out a little bit further to see if there's something I missed on, you know, even a higher timescale. And this, in this case, this would be relevant to me, right? Me marking out this further out level would be relevant to me because The market at the moment is currently in bullish order flow, which means that this is another thing that you need to remember about bullish bearish order flow is that when you're in a bullish order flow, you're oftentimes reaching for a higher target, right? For example, the moment the market started going into bullish order flow at this point, you need to immediately zoom out and figure out where the market is targeting, or rather where the market makers are targeting on the larger timescale. In this case, very likely going to be Bitcoin all-time highs. Like it will take out this level and it will go further up, right? That's my prediction. And over time, as you continue working on, you know, Skill of reading the higher time frame bias, the better you're going to get at it. So don't worry about being perfect right off the get-go. Now I'm just going to share the concept. So that level is relevant. There is a very large possibility that Bitcoin hits there like within you know the same week or even a couple weeks. But that right, given the fact that we're still in an uptrend, this is not so relevant to me. Now just to give you another example on how to mark out your higher time frame key levels, just going to hop onto a random chart, right? Let's say BNB. So I'm going to be doing this on the higher time frame, which is the one hourly chart. Same thing. So I can see that one of these higher time frame levels has just been taken out, which is right here. Remember. These key levels, by the way, just in case like you might be getting confused here, is simply liquidity levels, right? Liquidity levels are always swing highs or swing lows. Remember what I talked about before about buy side and sell side liquidity? So that's my buy side liquidity that I'm marking out. And let's say that on a higher timeframe, this is the other level that I'm marking out. And so it's as simple as that, right? You can go further for sure like this, but is it truly relevant to you? I don't think so. And on a, you know, much further timescale, just because I don't see any higher levels for BNB, probably have to go all the way back to like 2021 to find, you know, a level that's higher. And that is indeed the case. So I'm just going to mark out this level just so I don't lose sight of the big picture. Just because we're in a bull market right now, the order flow is bullish, so I need to have a good idea of where the market is targeting in terms of a higher time frame target. So now my levels are marked out. So let's go back to the 1-hourly chart. And now comes step 2, which is using the key levels to determine your higher time frame bias, which is also very straightforward. All you need to do is to make an educated guess on where you think price is going to go next based on, you know, the order flow as well as recent price action, right? Those are the 2 criteria that you want to keep in mind. And when I say educated guess, I truly mean it. The thing is, there's no such thing as like, okay, I'm absolutely certain the price is going to go here. As a trader, you really need— a very important skill that you need to learn as a trader is to think in terms of probabilities. The only thing that's certain about the financial markets is that nothing is certain. And instead of thinking like, okay, the price will definitely go here, it's much more of an educated guess. It's more of like, okay, price is likely to head in this direction, and if it happens, then what do I do, right? It's thinking— it's about thinking in if-then statements. That might confuse you, so we're gonna save, you know, that topic for another video. But in terms of the higher time frame bias, again, it's an educated guess. And based on those 2 factors that I talked about before— what did recent price action do and what is the overall order flow. I'm going to use those 2 bits of information to predict a higher timeframe bias for BNB. So let's look at recent price action first. You can see that price has been, you know, in bullish order flow quite obviously, but it recently just took out this higher timeframe key level. And right now there is another key level that's quite close by that it could potentially take out within the next week or a couple of weeks. So now based on this, I have to make a hypothesis basically. Do I think that price is more likely to head down to the lower level Or do I think it's more likely to head to the higher level? And at this point, just a guess. And you can of course use a variety of factors to, you know, make this analysis. But given how, you know, price is still in a bullish order flow, I'm going to just continue to assume that, especially considering we're in a bull market, that if this liquidity level here were to get swept, I do think that the higher time frame bias is towards the upside just because of how everything is still going up. And we have just went through, like on Bitcoin, we've just went through a retracement period of about 2 months where, you know, Bitcoin has just been, you know, going down, right? Just to show you the example right here, about 48 days where Bitcoin dumped by 23% and the entire crypto market in terms of altcoins went down by like 50-60%. And only recently did price start going back into a bullish order flow. So I have reason to believe that this is not the end of the move, and I do think that the higher timeframe bias is still going to continue towards the upside. And if your higher timeframe bias is towards the upside, remember, every sell-side liquidity sweep is an opportunity for you to go long, right? Because this is where all the traders that don't know what they're doing, this is where they're going to be stopped out, and you can take advantage of them getting stopped out. Essentially what you're doing when you're getting stopped out is you're selling low and you're buying high, right? Just to give you an example, if I were to place a short, when the short stop loss gets hit, I am market buying, right? I'm essentially buying high. And if your stop loss is on a long position, what you're essentially doing is you're selling low. And you want to buy low, sell high, right? This is how you get ahead of everyone else, right? By buying when they're selling low and by selling to them when they're trying to buy high. And once you understand the higher timeframe bias and how to identify it, you're going to be always on the right side of the move. And so just to break it down once more, the way that you avoid false breakouts is very simple. You want to be able to identify where the market is going to go to next in terms of the higher timeframe. The way you do this is by marking out a couple of key levels, right? No more than 4. That's the rule because any more than 4 and you're just going to be confusing yourself. Once you have a prediction on where the market is going to go next. And you're not always gonna be right here, which is why it's important not to think in terms of certainty, more about probability. Meaning, okay, what are some signs that, you know, that would tell me that the market is no longer in bullish order flow and it's going into bearish order flow? So that's the time when I need to switch my stance, right? Remember what I talked about before about if-then statements, right? If X happens, then bullish order flow ends and I can start taking shorts. Until that happens, you continue on with the bullish order flow until the target that you have in mind that you believe the market makers are also looking at Until that has been hit, you're going to be all good. And when it comes to bullish order flow, remember, the way to avoid false breakouts is not to go short in bullish order flow, right? You always want to look to buy because just look at the example, or like just look at the last couple weeks of price action, for example. The expansions are like way bigger than, you know, these little retracements. And also these retracements take much longer to happen, or like these ranging conditions take much longer to happen compared to the pumps. The pumps happen quicker, move more. And so by trading on the right side of the equation, you're going to ensure that, you know, you're only getting into trades that are high probability, but that also give you a very high reward, and that you're not stuck there wondering like, did you make the right call? Again, you'll be on the right side of the equation. And by the way, if you truly believe that trading is able to give you the freedom that you deserve, but cannot for the life of you figure out how to make this work consistently, feel free to click the first link in the description box below. Don't worry, it's not some $997 course, or it's not even some free webinar or some free resource or whatever. It's just a video of me sharing with you how my company is able to help you solve your problem. And you don't even have to click it. In fact, I don't really mind if you click it or not. But for the people that this is relevant to, feel free to click it if you want some help fast-tracking the learning curve when it comes to trading. Otherwise, if you enjoyed this video, drop a like. It does really make my day. And if you found this content valuable and you would like to see more, like this, then subscribe. And if you'd like me to make a video on a topic that you'd like covered, then put a comment down below. But otherwise, thank you so much for spending your time with me. I truly appreciate it, and I wish you a blessed day. Cheers.