Looking to trade short-term? A breakout trading strategy could be the perfect option for you…

Julie Brownlee, Fsp Invest, 07 Jan. 2015

Tags: breakout trading strategy, trading strategy, breakouts, trading breakouts, trading, trading charts,

If you want to trade intraday or be in and out trades in a day or two, a breakout strategy is one option to consider.

A breakout trading strategy isn’t concerned with what’s going on over the longer-term. It’s all about what’s happening now. This also makes breakout trading a good option for when the markets are volatile.

So what is a breakout trading strategy? And how can you spot breakouts on charts?

Read on to find out…

What is a breakout trading strategy?

A breakout trading strategy is when a high and low are in a price range. You sit back and wait for the price of the asset to break out of this range. You then put a trade on in that direction.

The key to using a breakout trading strategy successfully is defining the price range.

You could use a price range based on a certain time period or a specific number of bars. You can also use a price range based on a series of consecutive breaks of highs and lows.

Have a look at the chart below…

Chart of a breakout trading strategy

Look at the blue boxes on the chart above of the euro dollar. These show areas of consolidation. In other words they are areas of multiple highs and multiple lows in a clear range.

For instance, you could use 30- and 15-minute bars to define the price range of highs and lows. Then you’d wait for breakouts from this range.

The rules of a breakout trading strategy

If you enter a trade based on your breakout trading strategy, you need to out a stop loss on to protect yourself against the breakout not lasting.

If you were going long, this would be below the price range. If you were going short, this would be above the price range.

You’d place your target price between 1.68 to 2 times the width of the range, Max Munroe in Forex Round-Up explains.

Traders commonly look for some price consolidation first. In other words, you want to see the price trading between defined highs and lows.

A breakout trading strategy in action

Let’s have a look at another chart. This one is also of the euro against the dollar, but using 30-minute bars this time.

Chart showing a breakout trading strategy in action

You can see the price movement in the shaded blue box. The large candle at the left of the box defines the range. You can then see the price consolidating.

You can see how the price remained in its range before breaking out.

So there you have it. If you want to trade short-term, a breakout trading strategy could be the perfect option for you.

*********** Best seller *************

Stop scrolling or you’ll miss your next profit opportunity!

In just one hour, you’ll be armed with every trading strategy, lesson, trick and hidden secret YOU need to make gains of 75%, 60% and 93% over and over again.

Starting now, I’m going to turn 11 years of full time trading experience into just 1 hour for you!

Click here, if you love profits!


Related QA

lenita.fourie777 asked:
I have lost PLENTY in Binary companies. I have lots of dept. I only have R 5 000 available now to try and make up some losses. If everything goes [read more]
Published at 23 Feb. 2018 in: Trading 1 Answer
joe9976 asked:
I have bought the South African Investor Crypto Wealth Package so that I can start investing in Bitcoin. Sam Volkering recommended opening an account [read more]
Published at 23 Feb. 2018 in: Trading E-mail 1 Answer
deongt asked:
Hi Timon. I am currently subscibed to Rhst and have a broker acount with Gt247. I,m thinking of subscribing to Pick pocket trader. Can I use the same [read more]
Published at 21 Feb. 2018 in: Trading 1 Answer
emmamaya020 asked:
Hi Timon, I am directing this question to you out of great concern from within. I recently subscribed to RST tips for making extra profit and on [read more]
Published at 21 Feb. 2018 in: Trading Trading tips 1 Answer
e7469 asked:
I already have an active old trading account with GT247, can I use this account? It was not 1 of the 2 brokers you recommended. Sue Neumann [read more]
Published at 20 Feb. 2018 in: Trading Broker firms 1 Answer

Related articles:




Youtube Twitter Facebook

Connect with us:    

  • Accelerated Investor
  • Accessories