01
What is a breakout?
A breakout occurs when price moves beyond a level or structure that previously contained price.
Traders may watch areas of consolidation, support, resistance, or other clearly defined boundaries for potential breakout opportunities.
02
Why breakouts matter
A breakout can represent a change in the balance between buyers and sellers. However, not every breakout develops into a sustained move.
False breakouts can occur when price temporarily moves beyond a level and then returns inside the previous structure.
03
Building breakout rules
A breakout strategy should define what qualifies as a breakout, how an entry is triggered, where invalidation occurs, and how risk is controlled.
- Define the breakout level
- Define the entry trigger
- Define the invalidation point
- Define the maximum risk
- Define the exit approach
Lesson complete
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Review what you learned, then continue through the Trading Strategies course.