Range breakout

Breakout · Difficulty: Beginner

Education only. Delayed data. Past results do not predict future results. Not financial advice, and no strategy here promises a profit. Every strategy can lose money, and a rule that worked on past charts may stop working. Practise with virtual money first.

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The idea

Price spends time moving sideways between a floor and a ceiling. A close decisively beyond that range can start a new move.

Indicators and settings

Volume, ATR 14 and ADX 14. Mark the range high and low on the chart with the mark tool.

Entry rule

Mark the range. Consider entering when a candle closes beyond the range by a margin (for example 0.5 × ATR), ideally on above-average volume and with ADX rising.

Exit rule

Target a move about the height of the range, or trail below the breakout level. Exit if price closes back inside the range.

Stop-loss and risk rule

Stop back inside the range, just under the broken level. Risk 1% or less.

Best conditions

Clear, well-tested ranges that lasted many bars.

Pitfalls

Fakeouts: price pokes out and reverses.
Chasing late after a big breakout candle makes the stop far away.

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Illustration only; ignores slippage, tax and most costs. Not financial advice.