A breakout is a potential trading opportunity that occurs when an asset's price moves above a resistance level or moves below a support level on increasing volume.
The first step in trading breakouts is to identify current price trend patterns along with support and resistance levels in order to plan possible entry and exit points.
Once you've acted on a breakout strategy, know when to cut your losses and re-assess the situation if the breakout sputters.
As with any technical trading strategy, don't let emotions get the better of you. Stick with your plan and know when to get in and get out.
consolidation trade in a limited range.
Identifying consolidating stocks involves looking for those that have steady support and resistance levels, trade in a narrow range, and have low trading volumes.
An important step in trading consolidation patterns involves assessing how long the pattern has held.
Trading on narrowly consolidated stocks can happen but there is often less room for profit due to the small range.