How to Trade a Breakout?
Breakouts are the high probability and low risk setup. These Setup occur mostly when the stock is in a consolidation state forming either but not limited to the below mentioned patterns:
1. Ascending, Descending and Symmetrical triangle
2. Channel Consolidation Pattern
3. Rising Wedge
4. Falling Wedge
5. Support (Demand) and Resistance (Supply) Breakout
6. Moving Average Breakout
So, what makes Breakouts a low risk setup?
Usually when such breakout happens, a good risk reward ratio can be achieved, because usually in such cases, Stop Loss is kept just few points above/below the support line/trend line. Please note: Stop Loss should not be very tight and there shall be some leverage in case the stock retraces back.
What Can be learnt from this structure?
What next?
Stock might retrace back to the trend line and resist the same and then make a fresh fall. To confirm the entry, another continuation candle or a bearish candle near the entry would be the best possible scenario.
1. Ascending, Descending and Symmetrical triangle
2. Channel Consolidation Pattern
3. Rising Wedge
4. Falling Wedge
5. Support (Demand) and Resistance (Supply) Breakout
6. Moving Average Breakout
So, what makes Breakouts a low risk setup?
Usually when such breakout happens, a good risk reward ratio can be achieved, because usually in such cases, Stop Loss is kept just few points above/below the support line/trend line. Please note: Stop Loss should not be very tight and there shall be some leverage in case the stock retraces back.
What Can be learnt from this structure?
- Stock Under Consolidation taking Support from the trend line
- Closing below the Trendline
- 50 EMA broken and closing below that
What next?
Stock might retrace back to the trend line and resist the same and then make a fresh fall. To confirm the entry, another continuation candle or a bearish candle near the entry would be the best possible scenario.
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