Intraday Breakout Trading Strategy - Breakout Trading | Espresso

Intraday Breakout Trading Strategy Explained

Regardless of the type of investor you are, the share market presents equal opportunities for all. While most individuals prefer to buy and sell shares by investing money, others opt for day-trading.

Published on 19 December 2022

What is Intraday Breakout?

Timing is a crucial factor in trading. More so, in intraday trading, the investors need to be aware of the power of the right timing. In the breakout strategy, time plays a very important role. It comprises identifying the brink where the stock prices are rising or falling below at a certain specified time.

The investors can buy the stock if the trend soars the prices above the brink point. Similarly, when the prices plunge down the brink point, the investors can sell the stocks. Simply put, the breakout strategy is all about the fact that when the prices of the stocks cross the brink point, the trend will be continued, and the market will be more volatile in nature

Day trading is indeed intricate, but it can fetch great profits in a much shorter period.

Knowing and comprehending several strategies can help day traders to make the most profits. If you’re one such day trader, you must know about the intraday breakout trading strategy for your own benefit. So, read this article to learn all about it.

Intraday Breakout Trading Strategy: What Is It? 

The intraday breakout trading strategy is a stock price shift or movement surpassing a recognized resistance level, followed by an enhanced volatility level and heavy volumes. You should buy the stock if the stock price breaks above a particular price resistance level.

Breakout trading is a pro-level, highly-effective trading strategy that needs traders to determine price movements once the price consolidation is done. Plenty of traders are caught unprepared when the market trends are high due to sideway movement.

Once the consolidation period is over, the traders seek a breakout to purchase the price that breaks a level of resistance. Subsequently, the breakout appears underneath a support level. Traders can execute them in every trading style.

Due to the high flexibility, the breakout strategy can be traded on every single chart, ranging from the one-minute chart to the weekly one. The eclipses are developing that resistance and support level by initiating substantial momentum.

The Process Involved In The Intraday Breakout Trading Strategy

The initial phase of the intraday breakout trading strategy is understanding and determining the resistance and support level. You can do so by checking the last day’s trade range. The low trading range is considered the support level, whereas the high trading range is perceived as the resistance level.

Traders leverage these levels while implementing their intraday breakout trading strategy, as these are considered the zones where prices will encounter challenges to break through.

Simply put, the last day’s high range is a zone where stock sellers control and influence the market, and the price faces difficulty surging above. Meanwhile, the previous day’s low range is where the stock buyers influenced the market, and the price faced challenges falling below.

When executing an intraday breakout trading strategy, you must wait for the price movement to surpass resistance or support.

After the price breaks through one of these levels, you can trade in on that particular route. At that time, you should only be worried about whether you need to run the trade until it reaches the target or makes a profit.

Whenever the price breaks through its last established range of consolidation, the intraday breakout trading strategy tries to flee into the market.

Thus, it’s safe to say it’s a momentum-based trading technique. It implies that after a breakout, the trade must be held off until the momentum stops moving in the particular direction of the move.

Learn All The Breakout Trading Patterns

  • Ascending Triangle: It occurs whenever the market price tries to make lower lows and higher highs. Subsequently, it designates and specifies a bullish price action. Before completing the pattern, they must traverse the trend two times.
  • Symmetric Triangle: It forms whenever the stock market undergoes the indecision mode given past a robust trend.
  • Descending Triangle: Sharing similar traits with the ascending pattern, they occur in a bear market. Three trend lines form a descending triangle. One line is a horizontal trend line linked to the pattern’s low, and the other two trend lines converge in a downward-sloping trend line.
  • Bear Flag: It forms whenever markets merge at a time of downtrend. They’re similar to the bull flag (mentioned below) but in an opposed direction. The trend line connects the lows and the highs parallel.
  • Bull Flag: These flags are a prolongation pattern signifying a shorter pause in the market trend. The lows and lows are connected by the trend line almost parallel.
  • Donchian Channel: It is beneficial for determining market volatility. The donation channel with low volatility has narrow periods. These narrow bands may start requiring breakouts.

Final Words

For price action trading, the Intraday Breakout Trading strategy is a trading establishment where traders await a stock to break through its intraday range in one direction (support or resistance). So, get the most out of this guide and start with this trading strategy to make high profits.

Chandresh Khona
Team Espresso

We care that you succeed

Bringing readers the latest happenings from the world of Trading and Investments specifically and Finance in general.