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Thomas DeMark's Approach - Part II - Trendline Breakout Qualifiers

Trend line breakout validity evaluation

### Trend line breakout validity evaluation - the first TD-breakout qualifier

After TD-line breaking trader is to determine the truth of a price breakout. Thomas Demark singled out three validity criteria of the breakout - TD Breakout Qualifiers. In this part I'll talk about first.

The first TD-breakout qualifier:

Downward breakout is true, if the closing price of the bar before the break higher the closing price of the preceding bar (Fig. 1). Upward breakout is true, if the closing price of the bar before the break lower the closing price of the previous bar.

Fig. 1. An example of applying the first TD-breakout qualifier

### Trend line breakout validity evaluation - the second TD-breakout qualifier

The second TD-breakout qualifier is stronger than the first, so it justifies the opening position, even if the first TD-qualifier has shown that it is a false breakout.

The second TD-breakout qualifier:

Upward (downward) breakout is true if the opening price of the bar, which broke trendline, is higher (lower) the downward (upward) TD-line (Fig. 2).

Fig. 2. An example of applying the second TD-breakout qualifier

### Trend line breakout validity evaluation - the third TD-breakout qualifier

Upward breakout is true, if the sum of the closing price on the eve of a breakout, and the difference between closing price and the lowest price on the same bar (or the closing price the two bars before the breakout, if it is lower) lower than the price break.

Downward breakout is true, if the difference between the closing price on the eve of a breakout and the difference between the highest price (or the closing price the two bars before the breakout, if it is higher) and the closing price on the same bar higher than the price break.

Fig. 3. An example of applying the third TD-breakout qualifier

After determining the truth of a breakout with the help of TD-qualifiers breakout before the trader gets the problem of determining price targets breakout, ie, to what levels will continue to move prices in the direction of the breakout.

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