Price breaking out of a trading range of any given market can mean an increase in volatility or the beginning of a new trend or a major price move. This can offer traders an opportunity to enter the market and with the right risk management low risk should the market move against the position taken.
By definition range breakout is when the price of an asset or given market moves out of a defined range of support and resistance. On the Long side, breakout traders can Buy the market when price breaks above a resistance level and Sell when price breaks below support levels.
The 10 minute Wall Street chart above, shows price trading within a range between the blue lines before breaking out to the upside providing an opportunity to possibly take Long positions. Traders choose the range breakout strategy because when it occurs on a given market it can mean the beginning of future volatility increases, huge price swings and, in some cases major price trends which all provide an opportunity for possible highly profitable trades.
Trading range can be defined in the form of price channels, triangles, flags and various other chart patterns. Because its price action based, range breakout trading can be used on all markets and on all timeframes.
Disclaimer – Futures, CFD, Margined Foreign Exchange trading, Warrants, Options and Spread Betting all carry a high level of risk to your capital. Only speculate with money you can afford to lose. Futures, CFD, Margined Foreign Exchange trading and Spread Betting may not be suitable for all customers, therefore ensure you fully understand the risks involved and seek independent financial advice if necessary.
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