BREAKOUT!

The word “breakout” sounds so exciting doesn’t it? It sure sounded exciting to me when I first started trading. But then I realized that it is much easier (and smarter) to buy pullbacks.

First of all, “What is a breakout?”.

A breakout is defined as a stock price that moves outside of a support or resistance area. You would then buy (or short) the stock once it moves above or below these areas.

But, it is not that easy.

There are three problems with trading breakouts:

1. Failed Breakouts

2. Consolidations

3. Pullbacks

Let’s break these down (no pun intended!) and I think that you will agree with me that trading breakouts is much easier said than done.