focus on day-trading instead of swing or position trades?
I don’t really like teaching you guys strategies out here in article format, but some of them are relatively simple and could be learned even in text format, and just require you to get the basics and do lots of practise and be profitable in the end. One of these strategies that I am going to show you guys today is – breakout trading. I can assume that you guys must have already heard about this type of trading, and it’s used a lot by many expert traders at all. I’ve seen some gurus stating that it isn’t profitable, but the traders which made 6-7 figures definitely trade a good breakout, so it’s your choice – who to trust. However, not any breakout works, and it has a lot of small little details to it which are mostly to be learned on practise, but I can still show you the basics and explain how it looks on the real chart.📈
A good side of this breakout strategy that it’s also great for beginners, as it is relatively easy to undersand, though not so easy to implement straight away, but fundamentals are clear – the rest is a matter of practice.
What’s a breakout – well it’s when the price breaks out, and it’s mostly about a level. The reason why this is a big deal is that it will have a strong momentum behind it, due to the fact that the level of support ot resistance is powerful (key level) and a lot of orders are lined out, so when it breaks out, the driving force will be strong enough to present some lucrative opportunities. The reasons for trading breakout are:
* Inreased profit opportunity: As we have already discussed it, a lot of traders may line up their orders on the level and when it breaks, it will have increased liquidity to go forward faster.
* Entry and exit is defined: Untile some other setups where the entry or exit points are actually variating, the breakout entry points are always the same (it’s where it broke out) and the exit is also pretty much known, and can only vary with the asset.
* Flexibiltiy across markets: breakout strategy can be used in various assets, for currencies, shares and else, and therefore this strategy is pretty universal.
What are the cores of breakout trading, these are absolutely vital to be understood and needed for this strategy to actually work:
1. Levels of resistance and support
Or supply and demand, if you are one of those* people… Support level is the level to which the price falls to and then bounces from it, it’s strong enough to prevent the price from falling further.
Resistance is the opposite of support, and it’s the level which prevents the price from going up even further, and the price reflects off.
2. Confirmation of Breakout
If you see the price break out the major level, good job, but this is only half of the matter. There could be many moments where the price goes up the level and makes it look like it broke it, but it then starts falling back, and this is called – false breakout. The price needs to give some kind of confirmation after breaking out, and that could be a pullback or some other variations of price closing inside the breakout zone.
3. Volume
The overall volume in the market can give you a hint about the traders participation and if its high, the the odds of breakout happening may rise.
Then the question is – how to spot a breakout and how often do they occur?
Right out of the gate I can tell you that these are most often not the things which can occur in a single session or a single day, as the most important pillar of a breakout is a major level, and it need to be tested by time and price, so it would take some time. There are some major levels which are tested for weeks and months, and you can open your terminals and head out to see GBPCHF on D1 TF, and you will see that the top level of this ongoing consolidation has been a major once since it’s first price check in 09/24. Surely there are some tells of a breakout in terms of patterns, flags and triangles and all of that. Others may argue that volume analysis is a good thing to make to spot the breakout, and both of them are not wrong, but this would be like digging a whole with a spoon…. So what you need is, eyes 👀.