A Better Understanding Of Breakouts

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That’s not to say that you won’t ever see any moves through these types of technical features exhibit breakout behavior – but often it’ll be that they coincide with structural features when they do. Breaks from a structural aspect are where price moves through an area which has already been tested and previously moved away from. They’re generally more significant when the move away from the tested area is clean and fast. The reason for this is that it indicates a greater level of change when the break does happen – and really this is what breakouts are all about.

In reality, it’s probably better to redefine the terminology we’re using as it may be this that causes the greatest level of confusion. A level can be taken out and a market can undergo a behavioral change. It’s really the latter that I see as what is typically defined as a “breakout”. A level being taken out might only mean a continuation of the same behavior. Of course this is still relevant to a trader, but it hardly constitutes a “breakout” if the market is simply continuing to do what it’s been doing already.

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