This Breakout Trading Strategy will create MILLIONAIRES...
Attention, traders,
Breakout trading stands as one of the most widely used trading strategies, offering a seemingly simple concept that becomes intricate and convoluted in practice. In this article, we will explore seven essential steps that every breakout trader should adhere to.
📚To provide a brief overview of breakout trading, this approach revolves around identifying significant levels such as horizontal support/resistance or trend lines, anticipating their potential breakthrough, and capitalizing on the resulting substantial market movement.
1️⃣Without surprise, the first responsibility of a breakout trader involves identifying key levels, preferably on weekly or daily timeframes.
2️⃣Once these key levels have been recognized, a breakout trader must exercise patience and await the confirmation of a breakout. This is where many traders stumble. The challenge lies in having clear and dependable rules to validate a confirmed breakout.
I personally employ the following rule: a breakout will be deemed confirmed when the candle closes above/below the structure on the highest timeframe where the structure is identifiable.
3️⃣After confirming the breakout, the subsequent step entails waiting for a retest of the broken level. Retesting is crucial as it provides a more favorable risk-to-reward ratio for the trade. While there is no guarantee that the price will retest the broken level, resulting in missed trading opportunities, retest trading generally yields higher gains in the long run.
4️⃣When initiating a trade on a retest, it is imperative to establish precise target levels—levels at which profits will be taken. Novice traders often make numerous errors at this stage. Remember that your targets should be realistic and based on the nearest strong structure levels rather than your desired returns.
5️⃣Additionally, a breakout trader must set a stop loss—a level of protection set below/above a previous minor structure to safeguard against stop-hunting. The stop loss represents the point at which the trader's predictions are proven incorrect and renders the trading setup invalid.
6️⃣Once a trading position has been opened and stop loss and take profit levels are set, patience becomes paramount. There is no guarantee that the price will experience a sharp rise or fall immediately after the breakout. The market may coil and consolidate for an extended period before exhibiting significant movement. A breakout trader must exercise patience and refrain from allowing emotions to interfere.
7️⃣Finally, it is crucial to remember that exit points are determined by stop loss and take profit levels. Adjusting the stop loss in the event of a drawdown, prematurely taking profits, or extending targets can be detrimental to your trading. Remain disciplined, avoid greed, and keep emotions in check.
Naturally, this seven-step trading plan alone is not sufficient for profitable breakout trading. Each step of the plan requires careful consideration of various nuances. Nevertheless, let this plan serve as your initial guideline: learn and adhere to it, while continuously refining its rules over time until you become a consistently profitable trader.
Are you engaged in breakout trading?
❤️Please show your support for this idea with likes and comments!❤️
Breakout trading stands as one of the most widely used trading strategies, offering a seemingly simple concept that becomes intricate and convoluted in practice. In this article, we will explore seven essential steps that every breakout trader should adhere to.
📚To provide a brief overview of breakout trading, this approach revolves around identifying significant levels such as horizontal support/resistance or trend lines, anticipating their potential breakthrough, and capitalizing on the resulting substantial market movement.
1️⃣Without surprise, the first responsibility of a breakout trader involves identifying key levels, preferably on weekly or daily timeframes.
2️⃣Once these key levels have been recognized, a breakout trader must exercise patience and await the confirmation of a breakout. This is where many traders stumble. The challenge lies in having clear and dependable rules to validate a confirmed breakout.
I personally employ the following rule: a breakout will be deemed confirmed when the candle closes above/below the structure on the highest timeframe where the structure is identifiable.
3️⃣After confirming the breakout, the subsequent step entails waiting for a retest of the broken level. Retesting is crucial as it provides a more favorable risk-to-reward ratio for the trade. While there is no guarantee that the price will retest the broken level, resulting in missed trading opportunities, retest trading generally yields higher gains in the long run.
4️⃣When initiating a trade on a retest, it is imperative to establish precise target levels—levels at which profits will be taken. Novice traders often make numerous errors at this stage. Remember that your targets should be realistic and based on the nearest strong structure levels rather than your desired returns.
5️⃣Additionally, a breakout trader must set a stop loss—a level of protection set below/above a previous minor structure to safeguard against stop-hunting. The stop loss represents the point at which the trader's predictions are proven incorrect and renders the trading setup invalid.
6️⃣Once a trading position has been opened and stop loss and take profit levels are set, patience becomes paramount. There is no guarantee that the price will experience a sharp rise or fall immediately after the breakout. The market may coil and consolidate for an extended period before exhibiting significant movement. A breakout trader must exercise patience and refrain from allowing emotions to interfere.
7️⃣Finally, it is crucial to remember that exit points are determined by stop loss and take profit levels. Adjusting the stop loss in the event of a drawdown, prematurely taking profits, or extending targets can be detrimental to your trading. Remain disciplined, avoid greed, and keep emotions in check.
Naturally, this seven-step trading plan alone is not sufficient for profitable breakout trading. Each step of the plan requires careful consideration of various nuances. Nevertheless, let this plan serve as your initial guideline: learn and adhere to it, while continuously refining its rules over time until you become a consistently profitable trader.
Are you engaged in breakout trading?
❤️Please show your support for this idea with likes and comments!❤️