Breakout Trades- Why Should You trade them
Read the Bitcoin Loophole full review to know why a breakout trade actually works and is a high probability trade.
There are two types of trades that you can trade. One is the trade that rebounds from support or resistance level. Here suppose the original trend of the market is down then you look for a demand level for the price to change direction to an uptrend from that level. If the original trend of the market is up then you look for a resistance level for the price of the stock to hit the resistance level and change to a downtrend,
The probability of this working out is good but if the trend of the stock is very strong then it may end up breaking the demand or supply zone and continuing with the original trend. This is where you take a breakout trade.
The breakout trade
The breakout trades are preferred by many because here you trade with the original trend. So suppose that the trend is an uptrend you look to enter a long position at a level which could have acted as a resistance level. Once the price breaks the resistance level you are sure that the trend is still strong and thus you can trade with confidence.
Similarly, if it is a down trending market and the price breaks the demand level then you get confidence that the original trend will hold.
How to trade the breakout trade
Wait for the price to reach the level. This is the support level in the case of a downtrend and resistance level in the case of an uptrend. Let the price now break the level.
Once done you are assured that the trend is still strong and is not planning to change itself. The price after it breaks the level will come back and retest the level again. This is the time you enter the trade as a buyer in the case of an uptrend or seller in the case of a downtrend. The stop loss should be placed below the resistance level in the case of an up trending market and above the demand level in the case of a down-trending market
False breakouts are common and this is something that should not deter you from taking this high probability trade. In case of a false breakout, you get out of the trade for a small loss that’s your stop loss