#BreakoutTradingStrategy

A breakout occurs when prices breach and hold beyond a support or resistance area. On a technical analysis chart, a breakout occurs when the price of a stock or commodity moves out of a range setup. Often, a stock or commodity oscillates between support and resistance zones, and when it breaks through one of these barriers, one can consider the direction it takes in a trend. Often, the resistance level breached by the price becomes a new support level, and vice versa. This can be a buy or sell signal, depending on the barrier breached. [ 1 ]

Support and resistance levels are considered stronger if a stock reaches them multiple times. Therefore, stocks that break through these stronger barriers are more likely to record prolonged movements. Stocks are not the only assets that break through support and resistance levels. Any market favored by technical traders can experience breakouts, including commodities and forex.

Active traders and investors use breakouts to identify trends at their beginnings. They are often followed by price fluctuations and increased volatility, making it fertile ground for finding profitable opportunities.