The chart in this video is an illustration of a mechanism rather than a record of anything that happened. The prices on it, 1.0780 through 1.0940, are invented so that the case being taught is actually on screen, and they are labelled as illustrative throughout. Every pip figure the video states, and both reward for risk figures, are arithmetic off those invented prices. Nothing in this video asserts that any instrument traded at any of them.
What is sourced below is everything the video claims about how orders, levels, breakouts and stops actually behave.
A breakout is a violation of a trend line, of support or resistance, or of a previous reversal point, and it signifies a change in buyer and seller behaviour.
Source: Fidelity Investments, Identifying Chart Patterns with Technical Analysis, Brokerage: Technical Analysis webinar series, slide 9. https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/learning-center/Idenitfying-Chart-Patterns.pdf
The same deck states that a pattern is not complete or activated until an actual breakout occurs (slide 5), which is the basis for the video’s claim that price visiting a level is not the same event as price breaking it.
Deciding whether a breakout has taken place is done with a confirmation filter, and the deck lists five kinds: intrabar, multiple closes, time, percentage or point, and money.
Source: Fidelity Investments, as above, slide 10.
The video uses the close as its filter because it is the one a novice can apply without any extra tooling. The deck’s list is the evidence that a close is one choice among several rather than the definition of a break.
Patterns are fractal: they appear in any charting period, weekly, daily or minute.
Source: Fidelity Investments, as above, slide 5.
That is why the same move can close beyond a level on one chart and only wick through it on another, which the video shows by drawing the same window at three densities.
Requested execution rates for currency stop-loss and take-profit orders are strongly clustered at round numbers, which are commonly used as support and resistance levels. Take-profit orders concentrate at round numbers, and stop-loss orders cluster strongly just beyond them.
Source: Carol L. Osler, “Currency Orders and Exchange Rate Dynamics: An Explanation for the Predictive Success of Technical Analysis”, The Journal of Finance, vol. 58, no. 5 (2003), pp. 1791 to 1819. https://ideas.repec.org/a/bla/jfinan/v58y2003i5p1791-1819.html
This is the source for two things the video says: that a level is made of resting orders rather than of the line drawn over them, and that stops tend to sit just beyond the level, which is the region a stop placed a few pips past it is being put into.
Osler’s paper also finds that this clustering is a candidate explanation for trends moving unusually quickly once a level is crossed, which is the behaviour the video’s breakout bar illustrates.
A market order guarantees that the order will be executed but does not guarantee the execution price, and the last traded price is not necessarily the price at which a market order will be executed.
Source: U.S. Securities and Exchange Commission, Investor.gov, Types of Orders. https://www.investor.gov/introduction-investing/investing-basics/how-stock-markets-work/types-orders
This is the source shown on screen when the video separates the price displayed at the moment of the click from the price the order filled at.
A stop order is an order to buy or sell once the price reaches a specified stop price, and when that price is reached the stop order becomes a market order. The price at which the trade is executed may differ from the stop price, especially in a fast moving market.
Source: U.S. Securities and Exchange Commission, Investor.gov, Stop Order. https://www.investor.gov/introduction-investing/investing-basics/glossary/stop-order
A protective stop protects capital and determines the amount of capital at risk before entry. Placement is described either by a filter in percent, points or money, or against a trend line, support or resistance level with a filter.
Source: Fidelity Investments, as above, slide 13.
“Before entry” is the load bearing part, and it is the source for the video putting the stop on the chart first and the entry second.
A retracement after a breakout has a name in this material: a throwback on a breakout up, and a pullback on a breakout down. Two limits are stated alongside it, and both are in the video: they do not always occur, and performance can suffer when they do.
Source: Fidelity Investments, as above, slide 15.
The second limit is the important one, and it is why the video does not present waiting for the retest as strictly better. The arithmetic comparison it draws is exact and is not in dispute: with the stop and the target held fixed, a lower entry is a shorter distance to the stop and a longer distance to the target. What that comparison does not establish, and what this source cautions against assuming, is that the move which comes back to its level is as likely to reach the target as the move which does not.
The target in the worked example is the height of the range added to the level it broke. That projection is the standard way of calculating a target on a horizontal congestion pattern: take the distance from the troughs to the peak and add that amount from the breakout price to the upside.
Source: Fidelity Investments, as above, slide 19, drawn in turn from Kirkpatrick and Dahlquist, Technical Analysis: The Complete Resource for Financial Market Technicians, 2nd edition.
A false breakout is price breaking out and almost immediately returning back through its breakout price. A failed breakout, or trap, is a false breakout after which price then breaks out in the opposite direction.
Source: Fidelity Investments, as above, slide 12.
These are the definitions behind the section showing the same setup resolving both ways.