Breakout Trading and Price Signatures

Introduction

• Breakout Trading: Capturing the price move as it breaks through resistance or support. This is a very popular form of trading.
• Challenges: Only 20-25% of breakouts succeed.
• Goal: Learn to identify and trade successful breakouts.

Successful Breakout Signatures

• Volume: Strong volumes should be present during the breakout.
• Base Building: The price should consolidate before the breakout.
• Candle Pattern and Absence of Selling: The breakout candle should be strong and close near its high.
• Trend Line: 50% of the body should be outside the breakout level.

Key Issues and Solutions

• Chasing Moves: Do not chase the move. Wait and focus on base formation.
• Liquidity-Driven Moves: Identify and avoid these.
• Risk Management: Follow proper entry, exit, and stop-loss strategies.
• Fail Fast Rule: If the breakout fails, accept the loss quickly and move out.

Practical Examples

1. Havells India
   • Entry: On STL candle breakout
   • Stop Loss: Below the breakout candle or base
   • Exit: On closing below the candle closing salience exit
2. BHEL
   • Consolidation before base formation, strong candle pattern, and proper volumes

Risk Management

• Risk-Reward Ratio: Should be at least 3:1.
• Entry: Should be made at the time of breakout.
• Stop Loss: Set below the candle low or base low.
• Exit: On closing below the salience exit.

Short Programs

• Price Action: Program for 6200
• Advanced Price Action: Advanced level program
• RSI: Advanced RSI program
• Option Trading: Option trading program