Breakout Anatomy Flashcards
What is breakout trading
trying to find the starting point for major price moves and getting in then, limited downside when done correctly
What is a breakout
When a asset price moves above or below a support or resistance line with increasing volume
When do the most explosive breakouts happen
when the price breaks out of price patterns like triangles, flags and head and shoulders patterns
What indicates the strength of support/resistance lines
the number of times that the lines are tested without being breached
When determining an entry point, how would you decide the bullish entry point
When the price gets close to the resistance level
How can you sorta confirm a breakout not being a fakeout
increasing volume, waiting until the end of the trading period to see if the price doesnt move back into the range
How do you determine an exit point when making a profit
Leave when the price breaks out the same amount as the range of the asset before breakout
Or average out the price swings before breakout
e.g. if range before breakout is 6 point wait for breakout to be 6 points higher
How do you determine an exit point when making a loss
If it breaks out above a resistance level, that is the new support level, if it drops below this then leave quick time
vice versa when shorting an asset
Name an ideal stock candidate for breakout trading
Strong resistance/support levels
After identifying an ideal candidate what do you do next
Wait for a breakout and ensure you confirm it
After the breakout what do you do after youve taken the trade
determine a definite exit point
What should you be careful of immediately after the confirmed breakout
Wait for the asset price to retest the new support line
