Trading strategies
Breakout
Definition
A breakout is a close beyond support, resistance or the edge of a range, ideally on above-normal volume. Many traders wait for a candle to close beyond the level before acting, instead of reacting to the first tick through it.
Example
Say a stock has topped out at $35.00 for weeks and usually trades about 400,000 shares an hour. One hour it pokes up to $35.10 early on, but the breakout counts only when that 1-hour candle closes at $35.40 on 900,000 shares, more than twice the usual volume. Had the same candle closed back at $34.90, there would be no breakout.
Hypothetical numbers, for illustration only.
Also defined in
- Chart Patterns Explained: Head and Shoulders, Double Tops, Flags and Triangles→ What are chart patterns?
- Triangle Patterns: How to Trade Ascending, Descending and Symmetrical Triangles→ What is a triangle pattern?
- Bull Flag Pattern: How to Trade Bull Flags, Bear Flags and Pennants→ What is a bull flag pattern? The pole and the flag
- Darvas Box Strategy: How Nicolas Darvas Traded Breakouts→ What is a Darvas box? How to draw the top and bottom
UpTickFlow is our product. These guides are education, not financial advice. Trading involves a substantial risk of loss.