Breakouts in financial markets are crucial aspects of technical analysis; however, many traders encounter false signals. This article presents key methods to increase successful trading operations.
Signal: Volume Spike
A breakout with an increase in volume of at least 50% above the 20-day average is an important indicator. It indicates institutional interest and confidence in the movement, helping to distinguish real breakouts from false ones.
Reading Candles as an Indicator
The characteristics of the breakout candle, such as its size and the length of wicks, provide useful information about the strength of the move. A candle that closes above or below support/resistance levels confirms the intentions of buyers or sellers.
Pullback Re-Test Strategy
The approach of waiting for a re-test of the level previously passed by the breakout provides additional high-probability entry opportunities. This helps avoid many false signals.
Applying breakout confirmation strategies such as tracking volume and re-testing levels allows traders to more effectively find entry points into the market and minimize loss risks.
