SGX Stock Charts

There are many ways to trade breakouts, but the concept remains the same. Breakouts generally involve a rise in a commodity's price above the major moving averages, a resistance level, usually its previous high, or a drop below a support level, its previous low. Support and resistance are important concepts for traders to understand when using breakouts. Support is a price level a commodity has difficulty falling below. In contrast, resistance is a price level a commodity has difficulty rising above. A breakout can occur after breaking an all-time high, also. Trading breakouts involves putting yourself in the direction of a trend. Therefore, because trends are temporary, it is important for traders to monitor price levels to trade with the trend and avoid losses.

An important point to remember when using breakouts, as a general rule, is volume picks up noticeably with the break of prices into a new trend or out of congestion. If the breakout is not accompanied by an increase in volume, it is likely to be a false breakout and prices will return to their previous levels quickly.


http://www.futuresmag.com/futuresclassroom/articles/fcr_a_9.html