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An Easy-to-Follow Trading Strategy for 2023

B The Trader
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Introduction

In this article, we will explore a simple yet effective strategy called the breakout strategy for growing your trading account. Many traders have tried the basic breakout strategy of buying when a stock breaks a prior high, only to be faked out and suffer losses. We will delve into the details of how to identify true breakouts, set up a plan, and determine where to enter and exit without being faked out.

Understanding Breakouts

The breakout strategy involves identifying stocks that have failed to break a prior high and finally break out. However, simply buying the breakout without considering other factors can lead to losses. To avoid fakeouts, it is crucial to evaluate the stock’s price action and determine if it is a genuine breakout.

Identifying Genuine Breakouts

When looking for a breakout, it is important to consider the stock’s price history. A stock that breaks out from a base and immediately shoots up without any pullbacks is not an ideal candidate for this strategy. Instead, look for stocks that have tested a prior high multiple times and then break out.

Evaluating Risk-Reward

Once you have identified a potential breakout, it is essential to evaluate the risk-reward ratio. Look for stocks that have pulled back from the breakout level, creating a clear risk-reward scenario. For example, if a stock breaks out from $1 to $2, it is not a favorable risk-reward as the potential profit is only $1 while the risk is the entire $1 investment. Instead, look for stocks that pull back to a support level, allowing for a smaller risk and a larger potential profit.

Applying the Breakout Strategy

Time Frames for Breakouts

Breakouts can be found in various time frames, but for the purpose of this strategy, we will focus on the hourly chart. However, breakouts can also be observed in smaller time frames like 5-minute or 15-minute charts, as well as larger time frames like daily charts. Generally, higher time frames tend to have stronger breakouts, but it is important to analyze each chart individually.

Identifying Breakouts on Charts

To identify breakouts on charts, look for areas of consolidation that have been tested multiple times. These areas act as support or resistance levels. Once the stock breaks out from these levels, it confirms a potential breakout. It is crucial to wait for a pullback after the breakout before entering the trade.

Entering the Trade

When the stock pulls back after a breakout, it presents an opportunity to enter the trade. However, it is important to wait for confirmation and evaluate the risk-reward ratio. If the stock pulls back to a support level that allows for a favorable risk-reward, it is a good entry point. Set your stop-loss at a level that indicates the trade is invalid, and determine your profit target based on prior highs.

Real-Life Examples

Let’s take a look at a few real-life examples to better understand how the breakout strategy works in practice.

Example 1: Carvana

In this example, we can see multiple touches on a consolidation area, indicating a potential breakout. Once the breakout occurs, the stock pulls back, providing an opportunity to enter the trade. By setting a stop-loss at the prior low and taking profits at the prior high, a favorable risk-reward ratio can be achieved.

Example 2: Nvidia

In this example, we observe a breakout from a key consolidation area. The stock shows strength by holding the breakout level and pushing higher. By entering on the pullback and taking profits at the prior high, a profitable trade can be executed. However, it is important to be cautious of warning signs, such as double tops, and adjust your position accordingly.

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Trade Management and Flexibility

It is important to understand that trading is not always perfect, and breakouts can fail. However, by following a plan and managing trades properly, it is still possible to profit from breakouts even if they ultimately fail. Flexibility is key in trading, as the market is constantly changing and unpredictable events can impact stock prices.

Frequently Asked Questions

Q: Can breakouts be found in different time frames?

Yes, breakouts can be found in various time frames, including 5-minute, 15-minute, hourly, and daily charts. Higher time frames often indicate stronger breakouts, but it is important to analyze each chart individually.

Q: How do I determine the risk-reward ratio for a breakout trade?

To determine the risk-reward ratio, evaluate the pullback after the breakout and set your stop-loss at a level that indicates the trade is invalid. Determine your profit target based on prior highs. Ideally, aim for a risk-reward ratio of at least 2:1 or 3:1.

Q: What should I do if a breakout fails?

If a breakout fails, it is important to have a plan in place. Set a stop-loss at a level that indicates the trade is invalid and exit the position. It is crucial to manage risk and protect your capital.

Q: How do I handle warning signs, such as double tops, during a breakout trade?

When you encounter warning signs like double tops, it is important to be cautious and adjust your position accordingly. Consider taking profits or reducing your position size to protect yourself from potential reversals.

Q: Can I apply the breakout strategy to cryptocurrencies?

Yes, the breakout strategy can be applied to cryptocurrencies as well. The same principles of identifying breakouts, evaluating risk-reward, and managing trades apply to trading cryptocurrencies.

Conclusion

The breakout strategy can be a powerful tool for growing your trading account if executed properly. By identifying genuine breakouts, evaluating risk-reward ratios, and being flexible in trade management, you can take advantage of profitable opportunities in the market. Remember, trading is not perfect, but with patience and discipline, you can increase your chances of success. Good luck!

Tags basic crypto trading strategiesday trading for beginnersday trading strategiesday trading strategylive day tradingscalpingstock market for beginnersStrategytrading
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37 Comments

  3. These are very valuable strategies for anybody who wants to get rich. Unfortunately, most people who will watch this video will not really be able to apply the principles. We may not want to admit, but as Warren Buffett once said, investing is like any other profession– it requires a certain level of expertise. No surprise that some people are losing a lot of money in the bear market, while others are making hundreds of thousands in profit. I just don't know how they do it. I have about $109k now to put in the market.

  8. Speaking from experience in the crypto world i don't think as a trader it would be easy for you to predict the market currently, only an expert with several years of experience could help you grow your portfolio currently. After the last year crash i had to result to the help of an advisor.

  9. The market is very unstable and you can not tell If it's going bearish or bullish. I advise y'all to forget predictions and start making a good profit now because future valuations are all speculations and guesses.When these reports are bullish take some off to the side lines, when news gets bearish start buying. "Keep it simple simple" that bear/ correction was the best thing that happened me. But all thanks to Eric Birger for his amazing skills for helping me to earn 15.6 Btc through trading chart. I believe we are in the spring phase…,.,

  11. Thank you for this wonderful video! I have incurred so much losses trading on my own….I trade well on demo but I think the real market is manipulated…. Can anyone help me out or at least tell me what I'm doing wrong?

  13. Before I retired 3years ago I challenged myself to put away 50% of my monthly income into stocks which is quite easy since I lived frugal without debt.I work as an account executive,and I make over $200,800.$100,000 goes into dividends and the other $100,000 goes to my living expenses, I am seeing improvements in my portfolio, dividends look certain,but I have to attribute this to only guidance of a licensed wealth strategist who allocates funds to a plenitude of assets, I have to stay discipline and remember that I am in this for a long term,recently got my first property and looking forward to get another soon.good luck everyone and thanks for the wonderful video

  15. Traders, have you considered the PiP Quotient Formula? It's been a game-changer for me. Before you integrate it, do your research and see how it could transform your trades! 🚀📊

  16. The famous trader Jesse livermore was the first to publicize this signal. But he didn’t use charts he just noticed a pattern stocks would reverse at a certain number or steam roll ahead. It made him a millionaire then broke over and over between 1907 and 1940, he wrote a book telling the public his secret then he committed suicide. Unfortunately it fell on deaf ears because world war 2.

  22. The market is very unstable and you can not tell If it's going bearish or bullish. I advise y'all to forget predictions and Start making a good profit now because future valuations are all speculations and guesses.When these reports are bullish take some off to the side lines, when news gets bearish start buying. "Keep it simple simple" that bear/ correction was the best thing that happened me. But all thanks to Eric Birger for his amazing skills for helping me to earn 15.6 Btc through trading chart. I believe we are in the spring phase..

  25. I have a 3 fund portfolio consisting of 33% S&P, 33% Total stock, and 33% international. I feel a need to focus on complete growth so I went 100% stocks, but does the SP500 and TSM overlap too much to make sense holding both? However I’ve been in the red for a month now. I work hard for my money, so investing is making me a nervous sad wreck. I don’t know if I should sell everything, sit and just wait but watching my portfolio of $450k dwindle away is such an eye -sore.

  31. I was advised to diversify my portfolio among several assets such as stocks and bonds since this can protect my portfolio for retirement of about $750k. I want to know: Do I keep contributing to my portfolio in these unstable markets, or do I look into alternative sectors?

  33. Amazing video, A friend of mine referred me to a financial adviser sometime ago and we got talking about investment and money. I started investing with $120k and in the first 2 months , my portfolio was reading $274,800. Crazy right!, I decided to reinvest my profit and gets more interesting. For over a year we have been working together making consistent profit just bought my second home 2 weeks ago and care for my family.

  34. The future belongs to those who believe in the beauty of their dreams. Success is a state of mind. I start investing my cash in other to achieve all my dream with the help of Lucy Mary Liam. The difference Mrs Lucy Mary make in my life is second to none. It's definitely a life changing kindness. I really appreciate her effort in my life time.

  35. Great video! Well I'm so happy I made the best decisions by having a good investment, Recently I'm able to acquire my third house even at my age and I believe if things keep going well I would retire early

  36. Great video, Thanks for keeping us financially Educated! To be successful in forex trading as a beginner you need videos like this, most especially connecting with the right professional Expert who will guide you to earn good profits, I just bought my first house through trading by the help of Expert Kayla.

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