Breakout trading is one of my favorite strategies because it captures strong market moves after a period of consolidation. In my Breakout Trading Strategy, I always identify key support and resistance zones on the 1-hour or 4-hour timeframe.
When price consolidates near resistance, I wait for a strong bullish candle to close above it with high volume before entering a long position. For short positions, I wait for a breakdown below support.
I usually set my stop loss just below the breakout candle for long trades or above it for short trades to minimize risk. My take profit target is often based on the previous swing high or a fixed risk-reward ratio of at least 1:2.
Breakout trading works best in trending markets, so I avoid it during choppy sideways movements. Patience and confirmation are essential.
