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Glossary · Chart and price

Breakout

A move in which price pushes decisively through a support, resistance or pattern boundary and continues in that direction.

By Sky Trade editorial teamUpdated

A breakout happens when price leaves a range or crosses a well-watched level and keeps going. Traders like breakouts because they can mark the start of a new move after a period of balance, and because the broken level gives a clear reference for whether the idea is still valid.

The problem is that many breakouts fail. Price pokes through a level, triggers orders and snaps back — a false breakout. Telling real from false in real time is hard, so traders add filters:

  • a candle close beyond the level, not just a wick;
  • a meaningful distance beyond it, for example a fraction of the ATR;
  • a retest of the broken level that holds;
  • context that supports the direction, such as the higher-timeframe trend.

Every filter removes some false signals and also makes you later, so part of the move is gone. No setting removes that trade-off.

For short expiries a breakout entry is a bet on follow-through within the expiry window, which is exactly where failed breakouts hurt. Sky Trade has no volume data, so volume confirmation isn't available there. See support and resistance.

Example

GBP/USD ranges between 1.2600 and 1.2640 for three hours, then an M5 candle closes at 1.2652. A trader waits for a dip to 1.2642 that holds before opening Higher with a 10-minute expiry.

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