Breakout trading is a popular strategy focused on capitalizing on price movements that occur when an asset's price "breaks out" of a defined support or resistance level. Traders look for periods of consolidation or tight trading ranges, identifying key price barriers. When the price decisively moves above resistance (for a long trade) or below support (for a short trade), often accompanied by increased volume, it signals a potential strong trend in the direction of the breakout.
The idea is to enter the trade early in this new momentum. However, false breakouts are common, so traders often use confirmation signals, such as strong candle closes or volume spikes, and implement strict risk management with stop-loss orders.