Breakout trading can be exciting if you know all its aspects and the right strategy. In this, the price moves very quickly and can help you to earn huge returns. Well, it can risky too. There are situations where the price keeps breaking above resistance but shows a 180-degree fall. So, in such cases, you might face a huge loss if you don’t stay aware of the right breakout strategy.
Breakout Strategy for trading – An overview
Breakout happens when the price moves above to a certain level. This opens up an opportunity to trade for the investors if the price momentum happens in the investor’s favor. Breakout trading is one of the requesting entry type amongst the traders. At Chartanalysis we share the best breakout strategy for trading with you, which help to maximize your trading profit.
Breakout strategy guides you in the situation where you had made a wrong move, to save you from huge losses. It helps you to understand the difference between actual and false breakout. To be successful in trading you have to learn all those strategies which will minimize your losses and will let you earn huge returns. With our breakout strategy of trading, you can complete this dream of yours.
How does breakout strategy work?
There are two major types of breakout trading setups which are:
1. Swing high and swing low breakouts
2. Support and resistance breakouts
Breakout trading means an attempt to enter the market when the price moves beyond a defined or expected price range. A genuine breakout happens when the volumes also increase with the price. By knowing the right breakout strategy, you will be able to study the chart and graphs in the correct way. Breakout strategy helps you to understand the right chances of making a profit through trading in the stock market.
There are some steps involved in breakout trading strategy that you should keep in your mind. These steps involved:
Step 1- Spot the clear price range or spot the “V” shape high swing
The very first step in the breakout strategy to identify the price level. This can also be called your breakout trading level. This helps you to identify important clear levels.
Step 2- Wait for a break above the resistance level
After identifying the resistance level, you have to wait for a break above this level. A breakout or the formation of a breakout candle above resistance level will be a good sign. But this is not the only thing to notice, you have to wait for the VWMA indicator which works as a green light for trading options.
Step 3- Keep a close eye on the VWMA indicator and buy when it’s stretching up
It is important for you to wait for the VWMA to stretch up. When the VWMA moves aggressively this indicates the strong presence of volume behind such breakouts.
Stop 4- Put your stop loss below the breakout candle
It is always necessary to add a stop loss, to stay away from huge loss. Hence you should place your stop loss just below the breakout candle to stay protected.
Sharing some live examples
At our YouTube channel “Chart Analysis”, we share some live examples of profit-making from breakout strategy. Follow the link https://www.youtube.com/watch?v=oqhLWDOwfNI , to know that how we had made a total profit of Rs. 3.46 lakh by intraday trading in stocks like CIPLA, ITC, NIFTY, and Wipro.
Visit us at www.chartanalysis.co.in to get the profit from our online technical analysis and option strategy courses. We also stay connected with you at our telegram channel and at different social media platforms. Stay connected and trade safely.