Pros and Cons of Breakout Trading

The most common form of day trading, breakout involves identifying the pivot points (see definition in day trading terminology section) for a stock and then buying or selling short those pivots with the hope of getting a quick return when the price hits the desired point.  Breakout trading is seen as a good strategy for beginners, because it is an accessible trend following strategy.

Pros of Breakout Trading

• Potential for quick gains. 
• Breakouts are easy to identify. 
• Most trading platforms provide valuable, easy to follow information and charts for breakout traders.

Cons of Breakout Trading

• Volume of breakout trading
• An intraday breakout is not guaranteed. Some breakouts may take overnight or a few days to give returns.
• Requires a lot discipline as it requires a trader to make quick, informed decisions on the spot.