How to Make Money With Breakout Trading (25 Best Ways & Tips)

If you want to learn how to make money with Breakout trading, this article will help you a whole lot.

It reveals SECRETS to making money with breakout trading and super helpful tips you probably haven’t heard before.

 

Can You Really Make Money With Breakout Trading?

Of course you can!

Breakout trading is a great opportunity for lots of people, especially if the price for an asset gets past a certain resistance level, or it moves before a certain trading level.

How do you trade with breakouts? What’s the best way to work with them?

Learning how to identify them is great for both entry and exit portions of the trade.

It’s a technical type of strategy, and here, we’ll go over how to do this.

 

25 Best Ways to Make Money With Breakout Trading

Here are 25 ways to get better with breakout trading, and what you should do.

 

1. Don’t Let the Emotions Overtake You

This is a major problem that traders deal with.

They get into a trade, and when they see a chance for it to move, they get emotional, and go all in.

When something bad happens, they are immediately back out.

Emotions are dangerous in trading, and you’ll realize this early on.

Try to not let emotions get the better of you, and you’ll make more money if you don’t let emotions overtake you.

 

2. Trade With Virtual Money

Virtual money is a good way to start with breakout trading.

You’re not risking it all, but instead, you’re learning how to manipulate the market.

Trade Station is a good place to practice trades, and they offer virtual trades so that you understand the market better.

 

3. Look at the Current Trend Patters

Current trends are vital.

If you can look at the way that a price is going, you’ll be able to plan out the exit and the entry into different stocks.

This is important, because if you see that a trade is not going in your favor, you need to make sure that you leave when you can.

If you’re a fan of using this trading, look at the trends and follow them.

 

4. Understand What a Breakout is

If you’re curious as to what a breakout is, this is basically a stock price that’s moving outside the current support and the resistance tha’ts there.

It typically enters a long position when it’s above the resistance level, and then, it goes into short after the levels below.

Recognizing it is very important, as it can help you with improving this too.

 

5. Be Aware of False Breakouts

These are false breakouts where a break happens, and it’s basically not enough to break it out of the current trend.

This is definitely a compromising position, and the profit does decrease.

This can impact the profits, and it is a break that’s failed.

You should be mindful of these and try to avoid these types of breakouts.

 

6. Close the Positions When a False Breakout Has

Some people like to stay in this, but a big problem with sticking inside of false breakouts is there is a chance of losing more money.

Understand when it’s time to close and exit when you see false breakouts happen.

True breakouts are worth staying in, but if you stick around in a false breakout, this will eat your profits, so keep that in mind if you stick around.

 

7. Understand the Pros and Cons

Breakout trading is great for improving your earnings, and there are a lot of benefits that go along with it.

Some of the pros include:

• The trends are right there, and you’ll get them immediately.
• You can cash out on momentum.

But like with breakout trading, it’s important to remember the following cons that come with it:

• False breakouts are common
• It can be hard to continue with the trades

This can be hard for a lot who start it, so make sure to weigh in the options before you start.

 

8. Don’t Wait for It’s Right

This may seem contradictory, but the wrong thing to do is to wait for a breakout trade to feel right.

Breakout trading should not feel right, since in short-term mindsets, the pressure to buy ends up getting exhausted, and when you go for the short-term, there’s not enough energy to wait.

You start to take profits, and then it reverses.

If you wait too long, you could miss out on valuable profits.

The best time to wait is for when the market is in an upturn, and you know that it’s going.

Also See: Swing Trading & Intraday Trading.

 

9. Wait for the Higher Volume

The volume is the best way to wait for a breakout.

But you want to make sure that there is ow-volume with the trading before the surge.

Light volume shows that there is a potential chance for growth, and the chance for the market to transition.

It’s not the main criteria, but it’s important to look at this, as it can improve the trade quality that’s there.

 

10. Go for the Trade Direction

Never try to go against the current.

Instead go to follow the current trend.

Breakout trades can happen in a variety of ways.

You should look at the swing points which are there, in order to provide a proper line of resistance.

When engaging in breakout trades, you want to join this trend, and once the pullback is there, you’re a part of it.

It can be tempting to go against the odds, but the thing is, if you don’t follow the trades, you risk missing it all, you might lose all of the profits that are there.

 

11. Volatility is Your Friend

Volatility is the main factor that’s here.

Specifically, the volatility periods that are low and high are worth checking.

This is definitely a good way for you to watch, and you should make sure that you follow these cycles.

One way to work at this is the hourly range that pertains to the market.

You should look at the following with this:

• The trading ranges
• The periods of high volatility

This can be hard to fully understand until you become familiar with it, but the volatility will increase with new announcements and changes.

Spending time with trading won’t mean profits, but the trading during the right time is the key part of this.

 

12. Figure Out the Risk You’re Willing to Take

For a lot of traders, before they start with a breakout trade, they need to know how much they’re willing to risk with this.

Two things that you should always ask when you’re about to risk a breakout, include the following:

• How much to risk in every single trade
• How much percentage of the capital should be used for trades

 

13. Only Use 10% of Capital

This is a trading tip that most beginners use, but for every single trade, only use up to 10% of the capital that you have.

You should make sure that you only use 10% and then break that up into shares

You should always risk only up to 10%, anymore and you’re putting this at risk.

 

14. Consider Entering During a Retest

A retest is pretty much when a company is testing the potential for growth once again.

This offers two major advantages.

The first is a lot larger probability, and it can improve the setup of this.

It also does something else.

It reduces the adverse movements, so you’ve created a better stop-loss.

However, this is something that can be hard for those who aren’t willing to wait.

 

15. Be Patient

Lots of traders when they first get into this end up being super impatient.

That’s a problem.

If you’re not patient, you’re going to miss out on some trades.

Breakout trading thrives on this.

You need to be mindful of the pullback that needs to happen.

Otherwise, you’re going to make quick, impulsive trades.

 

16. Breakout Trading for Targets

Most breakout trades have a specific formation, and their natural type of target is the one that you clearly see and is projected.

Markets can get volatile, so you should make sure that you limit the orders.

You should make sure that you don’t let the profits go without an exit plan that’s a fixed target, because this can cause sudden loses.

 

17. Watching for Stop Losses

A very common type of stop-loss that happens is when you’re trading.

This can be a bit risky, so make sure that if you’re trying to also risk stop losses, you make sure it’s related to volatility.

If you’re a conservative trader, it can be a good way for you to handle your money, and it’s important to be mindful of how you do enact stop-loss breakouts.

 

18. Don’t Do Stop-loss Breakouts Too Soon

This is important, because when setting up stop losses, don’t tighten it too early on.

When you tighten this, it creates a premature stopping, and many times, the retests happen with this type of trading.

Be mindful of when you engage with a stop-loss point, and don’t bail out or set up the exit plan super soon.

 

19. Consider Underlying Stocks

When you’re trading, you also want to look at the stock underneath it, including the resistance and the support levels.

The more a stock has hit these areas, the more important they are.

The longer they’ve been there, the better your outcome will be.

It’s better if you go for something that’s been in this for a while now.

 

20. Check Out the Patterns

Some of the most important things to look at when choosing breakout stocks are of course, the patterns that you see.

Triangles, channels, flags, all of the like are there, and this can impact how consistency is as well.

Consistency and the resistance level are both things you should consider when choosing the right breakout trades.

 

21. Go Bullish if it’s Above the Resistance Level

You’ll see this with the entry points.

If it starts to go above where the resistance level is, then you’ll want to go bullish with the position.

If it’s below, you then want to set up a position which is bearish for you to work with.

This is important, because the wrong position can impact the pricing, and what you earn with breakout trades.

 

22. The False Breakout Trade Recipe

Fales breakouts do happen, and it’s imperative that you watch out for these.

The solution is to follow the breakout recipe.

First, you want to look for breakouts that have the following:

• Minor price formation
• Fail quick
• Are against the current trend

This is important, because you’ll see this when you’re looking for the right failed breakouts.

One way to also look for this is the Gimme Bar as it works with both price patterns and Bollinger bands, in order to help predict the patterns and prices for false breakouts.

 

23. Know What Higher Lows Inside the Resistance Tells You

Higher lows that go directly into the resistance are strength signs.

That’s because it tells you the following:

• No pressure to sell
• Strong pressure to support the prices that are higher.
• The buy stop orders happen above the resistance.

This chart pattern usually has an ascending triangle pattern, so there is a chance for a higher pattern, and you should keep it in mind.

 

24. Never Give Losses Room

You should never give a loss a ton of room.

When you do that, it accumulates very quickly.

This is especially true with failed breakouts.

 

25. Start With Stocks That Decrease the Volatility

Those that aren’t super volatile early on should sit on the shortlist.

You should scan these, but never automatically trade these.

The key is to review everything in an individual sense, and then, sort the candidates in this fashion.

 

Conclusion

Breakout trading is a popular way to improve your chances of winning.

Here, we went over 25 different tips to help you get started.

Remember it is a game that involves patience and waiting, and you should always be mindful of the difference the trades will make when choosing the trades to wait on.