Breakout Trading

Breakout trading looks for prices to break out from the consolidation range, in either direction. In other words, a breakout trader seeks price changes that put key support and resistance levels to the test and aims to profit from a large downward or upward move once these levels are broken. A breakout of a range occurs only once, with a significant move following. Hence, false signals are common in such conditions, which means that this method is less effective in stable markets. A volatile market, on the other hand, favors breakout trading since price changes are more significant and happen more frequently, which is what breakout traders search for.