Breakout Strategy
Trading
breakouts is not a new concept; traders have been using breakouts for
centuries. Today many of the world’s top traders trade breakouts for big profits.
So what actually is a breakout?
A breakout is the point at which the market price
breaks away, or moves out of a trading range. The trading range can be for any
length of time but once prices exceeds the high or low of the range, a breakout
has occurred.
The accepted market wisdom is “buy low sell high”
and this has been taught to us in high school and is the accepted philosophy of
many of the world’s investment community, from economists to brokerage houses.
The theory sounds one, but it is very dificult to make money trading this way.
The logic of breakouts is contradictory to this accepted market wisdom and works
on the premise: That in order to make money you should “buy high and sell
higher” in a bull market.
