How to Use a Breakout Strategy in Bitcoin Trading

⚡️ Is the breakout strategy profitable?

The bottom line. Ranges are simple to identify, making the range breakout approach very popular. Many traders, however, lose money using this method due to false breakouts, retreats from the breakout point, and unrealistic expectations.

⚡️ What does a crypto breakout strategy do?

A breakout occurs when the price is kept below a resistance level or above a support level for an extended period of time. Many traders set entry points and stop-loss levels by drawing a line in the sand at the resistance or support level.

⚡️ How do I recognize a false breakout?

Once the stock price surpasses $100, a financial breakthrough occurs. However, if it dips beneath this level and continues to drop, it reveals an invalid breakout – where momentum dissipates, and prices reverse course. This indicates that despite its initial surge beyond resistance or below support thresholds, there was not enough buying demand to sustain these changes in value over time.

A trade gone wrong is the result of a failed strategy. In this post, we'll show you how to use a high-probability crypto trading strategy to earn significant profits step by step – even if you're a novice.

Is the breakout strategy profitable?
How do you use a breakout strategy?

Breakout Strategy.

Our example breakout strategy is as follows:

We identify what we're searching for: a breakout of an altcoin with a larger upcoming move of at least 50% (which we anticipate will happen soon). We want to purchase cheaper and sell more.

The period for the trade's duration should be a few days (maybe even a few weeks). Big swings can occur in a single day, but they are more uncommon.

What is a 15-minute breakout strategy?
What is the best indicator for a breakout strategy?

Charts are used in BTC

We track two charts diligently: a weekly and/or daily chart, as well as a 4-hour one. The big picture of the altcoin's price can be discovered on the former chart, which allows us to better understand how far it has dropped in terms of wider market conditions and other significant details. By closely monitoring these time frames we can more accurately forecast when there may be an upcoming break out in prices or value.

Reasons not to trade on range breakouts

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Taking the initial step to launch a community garden requires some forethought and planning, such as 1.

1. Enter

The first step in our strategy is to locate an appropriate entrance.

When should I buy breakout stocks?
When should I buy breakouts?

It's possible to use the standard buy breakout method at this stage. Very low areas may be seen on several altcoin charts. Most adults have lost a great deal of value over recent months. Those are similar to these:

How do you know if you have a breakout?
How do you identify breakouts in trading?

A breakout strategy is all about finding where the price will break out in a new direction from an area of recent high (resistance) or low (support).

What is a breakout?
A breakout can occur at the horizontal or diagonal level

Determining when the price bottom will break away is a current challenge. If you don't, it could take weeks or months for prices to begin rising again and kickstarting another bull market – if that occurs.

Therefore, we are striving to achieve an equilibrium of two essential qualities.

Seek out budget-friendly alternative cryptocurrencies with validated breakout signals.

When browsing the chart, you'll quickly and confidently observe a noteworthy uptrend. Although prices may be too high at this time to fit your budget, fortunately it is highly likely that they will jump soon afterwards.

Identifying a breakout trader
Cryptocurrency breakout strategy

Heikin-Ashi is the ultimate approach to identifying and capitalizing on trends faster than ever. With this strategy, you can effectively eliminate market volatility while simultaneously pinpointing a trend in no time – as illustrated below!

By utilizing this method, we can take advantage of the bottom of an imminent uptrend and sell. As a bonus, here's a chart that appears to have already hit its floor and may start increasing soon:

Executing a breakout strategy
Where to place our stop loss

The daily chart depicts the first indication of a breakout.

But it sounds relatively easy. But the devil is in the details:

A trader purchases at the apex of an apparent new uptrend, anticipating that the market will continue to rise. As a result, probably, the fallback isn't just due to a mistake, but rather the start of an ascent.

risk to reward as a result of this trading setup?
Breakout strategy example

When you discover a breakout, as in the figure below, wait for confirmation of the breakout. We want to confirm that a higher low has formed above the previous resistance zone (represented by our black line).

We can confirm that a breakout is occurring when the price remains stable above recent resistance, which should turn into support. The confirmation becomes stronger still when we get a second higher low.

Part of this breakout strategy
Breakout Strategy

The green rectangle marks a buying zone.

breakout trade strategy potential
Breakout trade

2. Stop Loss

The following figure shows our example with the entry price and where we placed the stop loss.

If the stock market takes an unexpected dip and your original bet doesn't pan out, a stop order will help protect you from further losses. To avoid the drainage of your hard-earned money, it is essential to establish a stop order without delay in order to cut losses rapidly.

A breakout trade is any price movement outside of a specific support or resistance area
Your stop loss should always be placed above or below a breakout candle

Apply a Stop Loss Zone when you're in your trading account for the first time.

A stop-loss is a strategy for protecting yourself against a decline in the market. It makes good sense to use a stop-loss where the trend appears to be broken (at least for the time being); this is where professional traders exit rapidly before additional damage can occur.

This is a reminder of what happened to thousands of traders in the summer of 2017 when they didn't expect their coins to plummet that much.

Entry and stop loss example

What is the best breakout strategy?
Do you need indicators for trading on breakouts?

Grasping that a stop-out is not the ultimate conclusion of your trading journey is paramount. Winners are distinct from losers due to the lack of emotional issues associated with being stopped.

It's possible to think about it rationally, especially in cryptocurrency. That's why a single big win is more than compensated for by a couple of little losses. Especially in the field of crypto. As a result, resisting emotions on a single trade is critical.

An example of a stop-out trigger:

Are breakout strategies reliable?
The second higher-lower breakout range would have been the buy zone.

Had the price not dropped, the buy zone would have been identified through a second higher-lower breakout range. Sadly, it plummeted and forced us to place our stop below the boxen's support line–ultimately demonstrating how fortunate we were to escape such an unfavorable position.

One significant benefit offsets a few minor losses.

Trading with stop losses is a daunting prospect for many investors, as they are afraid of having their positions closed automatically.

Amateurs tend to be highly invested in their current profession, so much so that they are emotionally attached and have all of their hope and ambition riding on the altcoin they acquired. This renders them unable to maintain an objective stance.

How to get huge profits with simple crypto breakout trade
Is a breakout strategy profitable?

They refuse to concede defeat when the market isn't in their favor. “It can't be true; come on, baby… ” They get caught up in superstition and sentimentality rather than taking a small loss and going on to the next trade. – Don't let yourself be fooled by that sort of enthusiasm. Keep your head cool. K at an example of how to use a stop-loss order:

3. Target Profit.

We forecast where prices may travel beyond the breakout zone over days. This provides us with a risk-to-reward ratio, which might simply be a theoretical ratio based on your assumptions but is still critical to evaluate since it explains why you're making the trade and whether it's worth attempting.

What is the best strategy for trading cryptocurrency?
What makes a crypto breakout trade?

Discovering the Secret to Analyzing and Achieving Profit Goals

We predict that this option could experience a 50% surge based on previous support and resistance levels. It is not uncommon for values to return to their former level when the tide shifts, like at the beginning of an escape…

What is crypto breakout
Crypto breakout trade strategy

Price movement since the day of launch.

This long red candle, which was followed by a few days of bearish candlesticks, smashed through this former support level and tested the $10.50 level on August 18. This is an area where there's a lot of potential. When looking at the screenshot taken at that time, you can see that the price has already broken this minimum

So we have a target profit of 50% or more, which is achievable. Here you see the target on the 4-hour detail next to our entry:

Anatomy of trading on breakout trade
The best cryptocurrency day trading strategy for trading on cryptocurrency breakouts

As displayed on the EOS 4-hour chart, we have already witnessed an intense price rise last month. The potential for further growth within this market is uncertain, making now an opportune time to invest if you hope to benefit from any future gains! Don't miss out – get involved with EOS today and capitalize on its surge before it's too late!

Let's contemplate what would occur if you chose to divide the situation in half:

Crypto trading strategies you need to know
Cryptocurrency trading strategy

The first deposit was made at 0.00017776 BTC, equivalent to USD 8,243 today.

The cost of exit was 0.00026295 USD.

0.00008,19 (about 50% of the price)

Let the other half roll and see how far it goes. Once again, our stop loss serves as a risk management tool. We move it above our entry price to prevent the price from reverting to hold the trend.

How to identify breakout trade and false signals when trading
How to identify breakouts and false signals when trading

After enduring the treacherous storm, you can finally breathe a sigh of relief; even if your house were flooded to its limit, you'd be fully compensated for up to $61,000 in damages.

Raise the stop loss once again and let the winner go:

What is crypto breakout trade 2022
Breakout indicator

The stop-loss order has both advantages and drawbacks:

  • The disadvantage is that if the price reaches your stop-loss level, you will automatically get out.
  • The disadvantage is that you will never achieve the top since the stop will always be at the bottom. So it's a matter of personal preference whether you want to manually lock in profits at a level that, in terms of calculation, is unquestionably a large profit and was expected from the deal.
breakout trading strategy
Trading on the rupture pros and cons
  • If you prefer taking your time to make decisions and have a personal style, you should hold most of your position at the higher levels of price wave movements. Doing so will guarantee that even if prices drop afterward, you can still end up making more money than relying on stop loss alone.
  • If you secure your investment at 0.0001776 between the range of 0.00030000 and 0.00035000, you stand to gain a return of 100%!

For many professionals, the concept of profits is a core tenet of their business strategy. It's generally accepted that earning money should be at the center of any successful venture.

Savvy traders acknowledge success when it comes and graciously exit the trade.

breakout indicator
Trading on the breakthrough of how it works

Many novice investors tend to focus on the potential for further growth rather than taking profits when they arise. This can be a costly mistake, often leading to selling at a loss. A stop-loss order helps to mitigate this risk by allowing investors to set a predetermined price at which their position will be sold if the market moves against them.

Breakthrough trading formula
Breakout trading how to calculate

Taking Too Many Risks – “The Trap of Excessive Expectations.”

The second mistake that first-time traders frequently make is not taking profits when they have them, owing to greed: because they compare the chart to others where the price has reached specific extreme highs, they have certain expectations of how high the price should go.

Cryptocurrency trading in MAY 2022
breakout trading strategy

Trading with such a significant bias is risky: beginning traders frequently wait too long to lock in gains, generally until the top has passed and the price begins to fall.

Even more frightening, many traders will even watch the price until they find us with nothing. Alternatively, they may lose money in a trade where they had the opportunity to earn a significant profit! But maybe 80% instead of 200%, which is still better than nothing.

Meet Rahul Nambiampurath from Kerala, India, a skilled freelance writer specializing in cryptocurrency. Rahul, who studied finance at Sikkim Manipal University, is an expert in areas such as cryptocurrencies, blockchain technology, NFTs, and Web3, the new era of the internet. Rahul started exploring cryptocurrencies in 2014 and gained over fi ..