Breakout Trading Strategy
A breakout means when a stock’s price falls below the support level or breaches beyond the resistance level. This principle becomes the base of breakout strategy, which is a type of momentum trading. It requires the trader to enter and exit the intraday market quickly when the stock’s price moves outside a specific price range. The traders require to be quick and aggressive and potentially trade in higher volumes.
Advantages of Intraday Breakout Strategy
A breakout strategy can be quite beneficial because the momentum is almost always in favour of the intraday trader. When you opt for breakout trading, you know fully well that you have momentum in your favour.
How to Employ Breakout Trading
- Recognise a definite price range, then mark the price level on the breakout indicator
- Await a break and close over the resistance level
- Buy stocks at the breakout candle closing price when the VNMA stretches up
When to Avoid Breakout Strategy
- Do not employ breakout strategy when the market is far from support and resistance levels.
- Do not employ breakout strategy when you do not see the tight trading range of consolidation on the breakout indicator before the breakout occurs.
- Do not employ breakout strategy when the break is set against a potential dominant pressure.
Disclaimer: The information provided is for educational purposes only. Please seek expert advice before making investment decisions.