Breakout

A breakout happens when price moves beyond a level that had contained it: above resistance, below support, or outside the high or low of a range. The idea is that once the level gives way, orders waiting beyond it are triggered and traders on the wrong side have to exit. Both add fuel in the direction of the break.

Traders look for supporting evidence. A close beyond the level counts for more than a wick through it. Rising volume on the break suggests real participation. A long, tight consolidation before the break tends to produce a stronger move than a loose one. Some traders wait for a retest, where price returns to the broken level and holds it.

In Indian intraday trading the best-known version is the opening range breakout, using the high and low of the first 15 or 30 minutes after 9:15 am. On MCX, crude oil often leaves its daytime range in the evening session, when US hours begin. The previous day's high and low are closely watched levels on Nifty and Bank Nifty.

The common mistake is buying the first tick above the level with a stop-loss far below the whole range. Many breakouts fail and return inside. The other is chasing a breakout candle that has already travelled a long way, so that the entry is far from any sensible stop-loss and the risk-reward is poor from the start.