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IntermediateM15 - H1
Breakout Trading
Capture explosive moves when price breaks through consolidation patterns
Expected Win Rate:45-55%
Breakout trading aims to enter a position early in a new trend by trading the breakout from consolidation patterns. When price breaks through key levels with momentum, it often leads to extended moves.
What is a Breakout?
A breakout occurs when price moves beyond a defined support or resistance level with increased volume and momentum. This often signals the start of a new trend.
- Price consolidates in a range or pattern
- Momentum builds as range tightens
- Price breaks through boundary with force
- Volume typically increases on breakout
Common Breakout Patterns
Look for these chart patterns that often precede breakouts:
- Triangles (ascending, descending, symmetrical)
- Rectangles and ranges
- Flags and pennants
- Head and shoulders (neckline break)
Entry Strategies
Two main approaches to entering breakouts:
- Aggressive: Enter immediately on break
- Conservative: Wait for retest of broken level
- Use pending orders above/below levels
- Confirm with volume and momentum
Managing False Breakouts
Not all breakouts succeed. Protect yourself:
- Wait for candle close beyond level
- Use volume confirmation
- Place stops inside the pattern
- Accept that some will fail
Advantages
- +Can catch moves early for maximum profit
- +Clear entry points based on patterns
- +Works well in volatile markets
- +Defined risk with stops inside pattern
Disadvantages
- -Many false breakouts occur
- -Lower win rate requires good risk management
- -Requires quick decision making
- -Slippage can affect entries
Best Suited For
- Active traders who can monitor charts
- Those comfortable with lower win rates
- Traders who excel at pattern recognition
Practice This Strategy
Test the Breakout Trading strategy risk-free on a demo account
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