#BreakoutTradingStrategy Key Principles of the Breakout Strategy

1. Identify a support or resistance level

• A resistance is a ceiling above which the price cannot rise.

• A support is a floor below which the price cannot fall.

• The most reliable breakouts occur after a period of consolidation or low volatility.

2. Wait for the breakout

• A bullish breakout: the price breaks through a resistance.

• A bearish breakout: the price breaks a support.

• High volume = confirmation. A breakout without volume is often a false signal.

3. Entry into position

• Aggressive: enter as soon as the price breaks the level.

• Conservative: wait for the close above/below the level for confirmation.

• Another approach: wait for a pullback on the broken level, which now acts as reversed support or resistance.

4. Risk management

• Place a stop-loss just below the broken level (in a bullish breakout) or above (in a bearish breakout).