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Breakout Trading Strategy Quick Guide With Free PDF

Breakout trading involves entering trades when the price breaks through key support or resistance levels, offering high reward potential. This strategy can be applied across various time frames and markets, particularly where there is significant volatility. However, traders must be cautious of 'fakeouts' where the price briefly breaks a level before reversing, leading to potential losses.

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77 views9 pages

Breakout Trading Strategy Quick Guide With Free PDF

Breakout trading involves entering trades when the price breaks through key support or resistance levels, offering high reward potential. This strategy can be applied across various time frames and markets, particularly where there is significant volatility. However, traders must be cautious of 'fakeouts' where the price briefly breaks a level before reversing, leading to potential losses.

Uploaded by

mahmoud
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Breakout Trading

Strategy Quick Guide


With Free PDF
(https://learnpriceaction.com
trading-strategy-with-
free-pdf/)

Breakout trading can o!er you the opportunity to find and make very high
reward trades that can be highly profitable.

Some of the most explosive and also profitable trades are breakout trades.
The reason for this is because just before price breaks out of an area it is
o"en tightly contained. When price eventually does breakout it can o"en
then explode in a large move.

In this lesson we go through exactly what breakout trading is and how you
can make high probability breakout trades.

NOTE: Get your free Breakout Trading Strategy Guide PDF Below.

Free PDF Guide: Get Your Breakout Trading


Strategies PDF Guide

Table of Contents 
1. What is Breakout Trading?
2. What are the Advantages of Breakout Trading?
3. The Basics of Finding a Breakout Trade
4. Simple Breakout Trades
5. Intraday Breakout Trading Strategy
6. Example Breakout Trading Strategy
7. Lastly

What is Breakout Trading?


When you are making a breakout trade you are looking for price to ‘break’
through a key level in the market.

The two most common levels traders will look for breakout trades are
through support and resistance levels and through trendlines
(https://learnpriceaction.com/how-to-correctly-draw-forex-trendlines/).
As a breakout trader you are looking to enter a trade when price breaks a
key level and make a profit as price continues on with the break.

See the example breakout trade below. Price at first is contained and
rejects the resistance level. The breakout trade comes when price breaks
through the resistance level. This allows for long trades to be placed and
profits to be made as price moves higher.

What are the Advantages of Breakout


Trading?
Breakout trading can be done on all time frames and on nearly every
market.
The best markets to make breakout trades are where there is a lot of
market movement and volatility. This will give you a better chance of
seeing price explode through a key market level.

When breakout trading you have uncapped profit potential. This means
that unlike a strategy such as range trading
(https://learnpriceaction.com/range-trading-strategies-with-free-pdf/)
where you are trading back into a support or resistance level, you are
trading out of a support and resistance level. This allows you to make a
trade that could run into a very large winning trade.

Whilst there are a lot of advantages to breakout trading, there are also
some very real risks.

The example below shows exactly what happens when a breakout trade
quickly turns into a fakeout. This happens when price attempts to breakout
of a key level, but quickly snaps back and stops all of the breakout traders
out.
The Basics of Finding a Breakout Trade
The most important thing to breakout trading and what new breakout
traders o"en struggle with is first finding a major level.

You need to be able to first identify that the potential breakout level has
been respected as a support or resistance level on multiple occasions.

This goes the same for trendlines.

See the example below. Before breaking out higher price had respected the
obvious resistance level twice. This sets up a clear breakout trade when
price moves up higher and looks to re-test the same level on a third
occasion.
Simple Breakout Trades
Some of the best breakout trades are also the simplest.

Once you have found an obvious level that price has been contained within
such as a key support or resistance level, then you can start looking for
your breakout setups.

Intraday Breakout Trading Strategy


One of the most popular trading strategies
(https://learnpriceaction.com/trading-strategy-guides/) is finding and
making intraday breakout trades.

Intraday breakout trades can be both explosive and highly profitable.


The main thing you want to keep in mind when looking for intraday
breakout trades is that you want to trade with the momentum on your
side.

For example see the chart example below. Once you notice price has
rejected an obvious support level on multiple occasions, then you can start
looking for breakout trades lower.

The first chance to make a short breakout trade is when price makes a
clean breakout.

If you missed this first trade you could take the second chance entry when
price retests the old breakout area and it holds as a role reversal and new
resistance level.

Example Breakout Trading Strategy


The same strategy used to find intraday breakouts can be used to trade
breakouts on higher time frames.
These higher time frames can be as long term as you like, for example;
daily, weekly or even the monthly time frame.

In the example below, price breaks and importantly closes out of the key
support level. This is the first chance to take a short breakout trade.

A"er selling o! lower price then makes a move back higher and retests the
same old support level that price previously broke out of. This is a high
probability level to look for new short trades as these levels will o"en hold
as role reversal levels just like this level held as a new resistance level.

Lastly
Breakout trading can be fast paced, exciting and it can also o!er you very
high reward winning trades.

With that said, it can also come with a lot of risks if you have not practiced
your chosen breakout strategy and mastered it.
There is a very real risk of making breakout trades that quickly turn into
‘fakeouts’ with you quickly being stopped out.

If you want to add breakout trading into your trading toolbox, then the
best thing you can do is get a set of
(https://learnpriceaction.com/recommended-broker-and-charts/) free
demo trading charts (https://learnpriceaction.com/recommended-
broker-and-charts/) and test out di!erent breakout trading strategies to
see what suits you the best.

Free PDF Guide: Get Your Breakout Trading


Strategies PDF Guide

Your Guide to Price


Action Entries FREE
PDF Download
How to find, enter and place stop losses on the best
price action entries
(https://learnpric
eaction.com/wp-
content/uploads/
2020/11/price-
action-trading-
guide.png)

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