Breakout Trader

DEFINITION of 'Breakout Trader'

A type of trader who uses technical analysis to find potential trading opportunities, identifying situations where the price of an asset is likely to experience a substantial movement over a short period of time. Breakout traders generally look for key levels of support and resistance and will place transactions when the asset's price passes through these levels. Long positions are taken when the price of an asset breaks through a level of resistance, and short positions are taken when the price breaks below a level of support.

Breakout Trader

BREAKING DOWN 'Breakout Trader'

Many breakout traders find trading opportunities by identifying chart patterns such as channels, ascending triangles, descending triangles, head and shoulders, etc. These types of traders will generally set up target prices to be equal to the distance between support and resistance levels.

RELATED TERMS
  1. Breakout

    A price movement through an identified level of support or resistance, ...
  2. Failed Break

    A price movement through an identified level of support or resistance ...
  3. Trading Channel

    When charting the price of an asset, this is the space on the ...
  4. Breakdown

    A price movement through an identified level of support, which ...
  5. Descending Triangle

    A bearish chart pattern used in technical analysis that is created ...
  6. Range-Bound Trading

    A trading strategy that identifies stocks trading in channels. ...
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RELATED FAQS
  1. What trading opportunities does a descending triangle offer?

    Learn about the trading opportunities that may be presented with a descending triangle chart pattern, including when traders ... Read Answer >>
  2. What is the breakout target price of an descending triangle?

    Find out more about the most common method traders use to place their target price following a breakout from a descending ... Read Answer >>
  3. Where do traders place orders when they identify descending triangles?

    Learn how to identify descending triangles and how traders use recognition of that chart pattern to place trades before the ... Read Answer >>
  4. How do traders identify descending triangle patterns?

    Learn how to identify a descending triangle pattern on a security or index's price chart, and discover why traders consider ... Read Answer >>
  5. Where do traders place orders when they identify ascending triangles?

    Identify the formation of an ascending triangle pattern to enter a trade to take advantage of a continued uptrend or a market ... Read Answer >>
  6. What trading opportunities does an ascending triangle offer?

    Recognize and utilize an ascending triangle formation on a chart to determine trading opportunities that anticipate a market's ... Read Answer >>
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