Breakout
When an asset's price moves outside a defined support or resistance level, usually accompanied by increased volume and momentum.
Plain-English Meaning
A breakout is like water bursting through a dam. After the price has been trapped between support and resistance for a while, it finally gains enough momentum to smash through the barrier and establish a new trend.
Why It Matters
Breakouts often lead to large, rapid price movements because they trigger stop-loss orders and attract new traders jumping into the new trend. They offer significant trading opportunities.
Simple Example
If a stock has been unable to cross $50 for three months, a sudden surge of buyers pushing the price to $52 with heavy volume is considered a breakout.
This educational example uses selected assumptions for reference calculation purposes. Real conditions may vary by broker, exchange, or instrument.
Beginner Mistake
Falling for "fakeouts" (false breakouts). The price might briefly poke above resistance, tricking breakout traders into buying, only to aggressively reverse back down into the previous range.
Note: Breakouts are chart events, not guaranteed trend signals. False breakouts can happen in all markets and timeframes.