(2) Wait To Confirm Stock Breakout
It is one of the most significant & tricky steps to handle trading breakouts in securities. Several traders prefer to wait for breakouts to occur on either side. They are eager to take positions as per the prevailing trend to earn money quickly from stock investment.
However, you should never jump into stock trading prematurely & blindly. Sometimes, stock breakout from tight trading range is not sustainable even for a day or two. It is known as “fake breakout” or “fake out”.
According to a post published in Investopedia, a stock showing false breakout is likely to revert back to previous trading range by the end of the day or within a day or two.
Thus, you should wait until near the end of the trading day to make any position.
(3) Set A Reasonable Price Target
It is one of the necessary steps to follow when trading breakouts. A stock trading in a narrow trading range is likely to show good up move or downfall after breakout.
When you are going to make positions for a trade don’t forget to set a reasonable objective or expectations. If you don’t, you are likely to find it difficult where to exit the trade.
You can set a reasonable price target by calculating an average move that stock makes. You can also set targets by measuring the distance between support & resistance (especially when trading on the basis of price patterns).
- Steps For Trading Breakouts: Shutterstock