Breakout Trading Strategy
Disclaimer: Note, The contents of this website are for personal research purposes only. They are not intended to be investment advice or a recommendation to buy or sell any security. You should consult with a financial professional before making any investment decisions.
How to profit breakout trading strategy is a professional guide to making that is proven and backed by research and individual trading skill.
This article will show you the secrets of making money in the financial markets.
The breakout trading strategy used by professional traders is simplified for you and you should backtest to be sure you understand it fully well.
Breakout trading strategy intraday is for traders looking to trade breakouts of the daily time frame.
The intraday breakout trading strategy is for day traders who look to take maximum profit and minimum loss for the day’s trades.
Oftentimes, the price is assumed to have broken the support and you’ll suddenly notice a reversal back into the support zone. Here, you got stuck and eventually lose money having rushed into selling the asset.
How do you position your trades for high-probability breakout trades?
Contents
What is Breakout Trading Strategy and how does it work?
A breakout occurs when the price of an asset moves beyond the defined support or resistance zone. A breakout trader looks to place a buy order after the price of an asset breaks above resistance or places a sell order after the price of an asset breaks below support.
This is a type of trading system that deals with momentum where breakout traders take maximum advantage of the market trend.
Many traders prefer breakout trading because of the guaranteed profits and low risk.
However, no perfect skill in trading the financial markets.
A false breakout could hamper your day trading if you get caught in trading false breakouts.
How to avoid false breakouts has been explained in my previous posts. The complete breakout trader identifies false breakouts and makes huge profit trading in the zone.
How to Profit Breakout Trading Strategy with Low Risks and High Rewards
Breakouts have to be traded with caution and a candlestick pattern formation that makes breakouts easier to trade with a minimum risk.
Do you have a better understanding of the market?
Are you familiar with different candlestick pattern formations?
Do you know how to set a risk-reward ratio?
These are the first steps to breakout trading strategy
Are you looking for a 5-minute breakout trading strategy? Remember, the long hour time frame makes the major decision of the market movement.
Breakout Trading Strategy After Price Consolidation
Trading breakouts after the price must have consolidated shows a professional way of trading breakouts.
This type of trading helps reduce the risk of trading and the winning rate is high.
Trading breakouts with price consolidating will only make you use a high risk because there would be no nearby support or resistance to use as a guide to set a stop loss position.
Taking an advantage of price consolidation around a support or resistance area will make a tight stop loss and increase the reward or winning rate.
Both buying pressure in resistance breakouts and selling pressure in support breakouts are high after the breakouts.
Breakout Trading Strategy with Market Structure
What determines your buying position in a breakout?
Are you looking for a trendline breakout trading strategy?
Trading breakouts with the market structure have proven to have better results than any other breakout trading strategy.
Do you see the price of an asset move into resistance with higher lows?
This is a strong indication that sellers are relaxing their muscles in the market and hence a strong buying pressure.
Second of all, you should place a buy order above the resistance to secure a good entry point.
A good chart pattern to use for this breakout pattern is the ascending triangle.
The opposite of the above strategy is when the price moves into support with lower highs. Use a descending triangle chart pattern for this breakout.
How to Profit Breakout Trading Strategy with Trend Movement
You should learn how to draw perfect trendlines for this approach of trading breakouts.
The indicator to confirm the breakout is the moving average.
The 20-period moving average is used for this trading strategy.
In a strong trend, the price of an asset respects the 20-period MA and it is always above it.
Pullbacks are known to be absent in strong trends.
You look to buy breakouts in a strong trend above the swing highs and sell below the swing low.
You can use 1ATR to set stop loss
Trades in this trend movement are exited once the price closes below 20-period MA or above 20-period MA in sell trade.
Conclusion
To profit breakout trading strategy, the longer ranges of the price of an asset prove strong breakouts, always look for a consolidation zone before trading breakouts. In strong breakouts, the 20-period MA can be used to follow the flow of the market.
Now that you have learned how to trade breakouts like a pro, is breakout strategy profitable?
How do you identify a breakout trade?
Disclaimer: Note, The contents of this website are for personal research purposes only. They are not intended to be investment advice or a recommendation to buy or sell any security. You should consult with a financial professional before making any investment decisions.
