What is a break out?

A break out occurs when a stock either fails to bounce off support or resistance. In this example, the stock is bouncing between its support at $49 and its resistance at $54. Every time it hits $49, the stock goes up, and everytime it hits $54 the stock goes down.

This continues until the stock hits its resistance of $54 and instead of going down it continues to go up. It breaks out of its trend and goes to $56. When a break out occurs it is normally a good sign that a stock will continue to go up. Many traders, called breakout traders, will buy when a stock has broken out and sell at a higher price. They will sell it when they are stoped out or when they hit the traders target price.

Break outs will normally have a high success rate especially if you are trading in the same direction as the market. If you choose to become a break out trader their are many ways to play this strategy. Feel free to take advantage of our sites free information.

Remember it is absolutly essential to your success that you develop your own system and to use proper portfolio management when trading.