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.


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