How to Trade A Breakout the Right Way?

To me breakouts are not recommended for trading, this is due to the standard way of trading breakouts can put you in the worst position for a trade. However with that being said many do like to trade them so i will post on how to trade them more effectively.

This is not my style but a style that has more success rather than just placing an order above a range or a order below. It involves more so a continuation confirmation pattern rather than a standard breakout trade entry.

Basically put, how it works is when prices moves out of a range whether up or down let it move, then let it retrace to the area of that previous resistance or support area again confirming this time it as a new support and resistance. Then once it moves back in the favor of the break then we enter only once it breaks past the previous lowest or highest move of the previous break. If it does not move in this way then chances are it is just a standard fake out, which means that do not want to be in the trade anyway.

In a way this is like confirming the move before entering which is the safest form of this type of trade.

fake out trade

Fake Out – This is when price passes support or resistance and then gets pushed back into the range.. As you can see from the above image just opening a sell trade after the breakout would of had you in the worst place ever. This is why confirmation is needed.

confirmed breakout retest

Confirmed breakout – Buying once price pullbacks to the range and entering past the full break for complete confirmation – This is more so a continuation pattern as can be seen above. Opposite can be done for sell, the above image only shows a long position breakout confirmation.

About Timon Weller

Timon Weller is the professional Writer and Trader behind the blog Forex Reviews. Timon Weller is also a professional Teacher of Price Action Trading and creator of the popular Training Series teaching people how to trade Price Action effectively called The Engulfing Trader. For other Forex Training available here at Forex Reviews click here.

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  1. Hey Timon,
    Thanks for that info on breakouts, i have been trading them a while now and i tend to be exactly what you say above, successful only half the time. I see what you mean by waiting for confirmation. I reckon you totally saved me future money in this business..

    I just subscribed by the way, your blog and information is priceless.. I will be back again. 🙂

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