Breakout Swing Trading
BeginnerDaily and weekly chartsSwing Trading
Strategy Overview
Trading breakouts from consolidation patterns and key resistance levels.
How It Works
Breakout swing trading focuses on stocks breaking out of consolidation patterns like triangles, flags, or rectangles. These patterns represent periods of equilibrium between buyers and sellers, and breakouts often lead to strong directional moves. The strategy involves identifying patterns, waiting for the breakout with volume confirmation, then riding the subsequent move. False breakouts are the main risk, so volume confirmation and retests are crucial.
Setup Rules
- 1Identify clear consolidation pattern
- 2Pattern should be at least 4 weeks old
- 3Decreasing volume during consolidation
- 4Tightening price range
- 5Check sector strength
Entry Rules
- Enter on close above resistance
- Volume must be 150%+ of average
- Or enter on successful retest
- Can buy anticipatory before breakout
Exit Rules
- Target at pattern's measured move
- Trail stop below 20-day MA
- Exit if falls back into pattern
- Take partial profits at +10%
Risk Management
- Stop below pattern support
- Risk 1-2% of account
- Reduce size if market weak
- Avoid low volume breakouts
Advantages & Disadvantages
Advantages
- • Clear entry and exit points
- • Good risk/reward potential
- • Explosive moves possible
- • Works in all markets
Disadvantages
- • False breakouts common
- • Requires patience for patterns
- • Can have wide stops
- • Whipsaws in choppy markets
Best Market Conditions
Markets transitioning from consolidation to trending