Trading glossary
What is a breakout?
A breakout is a move through a level, such as resistance, support or a pattern boundary, that price had previously been held by.
A breakout happens when price moves through a level that had contained it. Most chart patterns are only complete once the breakout happens, which is why the breakout level doubles as the confirmation level.
A close beyond the level is usually treated as more reliable than an intraday move through it. Many breakouts are followed by a retest of the broken level.
How traders use it
- Decide in advance what counts as a break: a close beyond the level on your timeframe is a common rule.
- Look at the candle that breaks. A strong close far through the level says more than a small one that only just crosses it.
- Plan for the retest rather than chasing the first candle.
Example
A stock has been capped at 50.00 four times over two months. A daily candle closes at 51.20, near its high. That close is the breakout. The next question is whether 50.00 holds as support if price comes back to it.
Frequently asked questions
How do you confirm a breakout?
Common methods are a close beyond the level, a follow-through candle, and a retest that holds. None of them guarantee it.
What timeframe should a breakout be judged on?
The timeframe the level was drawn on. A daily level is judged on daily closes.
Related terms
Related patterns
Educational content only, not financial advice. Chart patterns describe probabilities, not certainties, and every pattern can fail. See our disclaimer.