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Catch the explosion after the compression.
Breakout trading waits for price to compress inside a range or pattern, then enters in the direction of the breakout with a stop inside the former range. The thesis: low volatility begets high volatility, and the breakout is the inflection point.
Identify a range with at least 2 touches on each side over 10+ sessions.
Confirms the range is real, not noise.
Wait for a candle close beyond the range boundary (not just a wick).
Wicks are stop hunts; closes are commitments.
Volume on the breakout candle should be ≥ 150% of the 20-period average.
Confirms institutional participation, not retail spikes.
Enter on the close of the breakout candle or on a retest of the broken level.
Aggressive entry captures more move; retest entry has better R:R.
Initial stop goes inside the former range (midpoint of the range).
A real breakout shouldn't revisit the middle of the range.
First target: measured move projection (range height added to breakout).
Classic technical target with statistical basis.
Second target: trail with a 20-period EMA on the entry timeframe.
Captures extended momentum moves.
Manual horizontal levels — the core of the strategy.
Confirms breakout conviction.
Filters out low-volatility ranges that won't break cleanly.
Trailing stop
20-period EMA on entry timeframe after first target hit.
Pros
Cons
Buy strength, sell weakness — let winners run.
The classic trend-following approach: identify the prevailing direction with moving averages, enter on pullbacks to value, and trail your stop until the trend breaks. Boring, reliable, and the strategy that built Tudor, Dunn, and Campbell.
Fade the extremes; trust the average.
Mean reversion assumes price oscillates around a statistical average. When price stretches too far from the mean — measured by Bollinger Bands, RSI, or z-score — the strategy fades the move, betting on a return to the middle. Best in ranging markets; fatal in trends.
Most chart patterns are just support and resistance with extra steps. Master horizontal levels, role reversal, and confluence — and skip the 200-page candlestick encyclopedia.
The golden cross is the most overrated signal in retail trading — but the underlying concept is sound. Here's how to use MAs as filters, not triggers, and avoid the whipsaw graveyard.
Open the Risk Calculator with the strategy’s recommended risk percentage already in mind.
