Breakout Trading Strategy, popular among both spot and futures traders:
🚀 Breakout Trading Strategy: Key Points
Objective: Capitalize on strong price moves that occur when an asset breaks through a key support or resistance level.
📈 How It Works:
1. Identify Key Levels:
Support (bottom) and Resistance (top) zones using chart patterns (e.g., triangles, rectangles, flags).
2. Wait for Confirmation:
A breakout is only valid when price closes above resistance or below support, ideally with high volume.
3. Entry Point:
Enter the trade just after the breakout confirmation candle.
4. Stop-Loss Placement:
Below the broken resistance (for long trades) or above support (for short trades).
5. Take-Profit Targets:
Use previous price structure or measured move (e.g., height of the pattern added to the breakout point).
🔍 Tools & Indicators:
Volume spikes
Moving averages (e.g., 20 EMA for trend confirmation)
RSI/MACD for divergence or momentum confirmation
⚠️ Risk Management:
Breakouts can fail (fakeouts), so always use a stop-loss.
Position sizing should reflect risk per trade (e.g., 1–2% of capital).