Strategies
Breakout Strategy
Enter when price closes beyond a key level — trading the momentum of a breakout with stops below/above the breached level.
Key rules
- Enter on a close (not just wick) beyond the key level
- Volume should spike on the breakout
- Conservative entry: wait for retest of the broken level
- Stop below/above the broken level
- Avoid breakouts against a strong higher-timeframe trend
A breakout strategy involves entering a trade when price closes decisively beyond a defined key level — resistance for longs, support for shorts. The idea is to capture the momentum that follows once a significant level is breached and stop orders are triggered.
**Entry Criteria** 1. Price must close (not just wick) beyond the level 2. Volume should increase significantly on the breakout candle 3. The level being broken must be significant (prior highs/lows, pattern boundaries, round numbers)
**Timing Entry** - Aggressive: enter on the breakout candle's close - Conservative: wait for a retest of the broken level (which often becomes new support/resistance) and enter on the retest
**Stop Loss** Stop goes below the breakout level (for longs) or above it (for shorts). A tight stop just behind the breakout level is common.
**Risk Management** False breakouts (fakeouts) are common. To reduce false entries: - Require a full candle close beyond the level - Require volume confirmation - Avoid breakouts at the end of an extended trend - Use the conservative retest entry method