3 Powerful Techniques for Trading Breakouts

Breakout trading is ideal for finding entry and exit points in the markets. 

But a couple of times, false trading breakouts happen. And you get stuck in such trade. 

Many times you face such a problem. Then today's post is for you. I will share a few Practical rules to avoid fake trading breakouts.

First, let's learn what trading breakout trading means.

The breakout means prices move over the resistance or move below the support level. And proceed in the breakout direction.

Techniques For Trading Breakouts

Tip 1# Follow Closing Basis Prices.

A closing price carries more weight than a high low price. Because the close price gives more reliable signs of the market's shape.

The closing price was the only price listed in the newspaper before computer trading.

Count breakout as valid - when the price gets close above or below your Resistance/Support point.

When price cross. And don't give a close above or below your Resistance or Support level, don't count it as a valid breakout. 

Let's look at an example. In the below chart price is getting Resistance at the blue Angle/Trend line.

Tip 2# Wait for a Strong Bar After the Breakout.

Here you have to track the strength of the closing bar. To measure the strength rule is simple.

  • Candle/Bar close near the high is a sign of powerful strength.
  • Candle/Bar close near the low is a hint of weak strength.

Let's look at an example. In the below chart, the Breakout happens above the horizontal blue resistance line. 


So you've learned now. The closing price is more critical than high low prices.

Don't jump to take a trade on the penetration of the Resistance or Support level. Wait for the price to give CLOSE above or below your breakout point.

To make your entry more right, practice the trend strength bar process. It's easy & powerful when applied in the right manner.

In case you're a beginner and want to be more sure about the breakout.

Then first, let the price make a breakout on a bigger time frame. Then move on the lower time frame to locate the further breakout.

I hope this article will help you to identify valid breakouts for your trades. 
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About the author

Divesh Jotwani is a Full-time trader in the Indian stock market. He has spent over 20+ years researching and discovering WD Gann's methods and applying them day in and out markets.