I just made a brand new video for you guys on HOW to properly trade a breakout. I gets tons of questions on this topic and i know there are no Black and White answers but here i explain what i typically look for when playing a breakout trade.
1. NEVER chase a gap up. If a stock gaps UP over your trigger entry price. Do not chase it. WAIT. Look for a a potential gap fill or a mini intra day consolidation to enter new positions or even skip the trade completely for today. Look elsewhere.
2. Ideally, you wanna see the stock open LOWER then the trigger price and after a few minutes or couple of hours after the market open, you wanna see a fresh high volume breakout over the breakout price, THEN you can enter your position either manually or via BUY LIMIT order.
3. Not all breakouts work! Some will fail. So make sure you know where your stop loss will be once a breakout takes place (for short term traders: ideally a good place to put a stop loss would be the Current Day's LOWS). For SWING TRADERS: use a stop loss under a recent SWING LOW.
4. VOLUME is everything! If you see a breakout hit with HIGH VOLUME over or near the breakout price, then your confidence can rise that you might potentially be sitting on a good trade.
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