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How to Trade a Breakout: Breakout Trading Technical Analysis Primer

Spotting successful breakout setups can take time and experience to get a handle on. Actually trading them takes even more time and experience, as well as the psychological fortitude to withstand a run of losing trades before booking a winner that more than makes up for them. The best way to overcome that hurdle is to look at lots of charts on a regular basis.

Because breakout trading styles vary considerably, win rates for profitable systems can be below 50% or as high as 90%. Paper trading is an exceptional way to build confidence and develop your skills before putting real cash on the line. You have to remember that breakout trading is a probabilistic pursuit. That means that you don't know beforehand whether any single trade is more or less likely to end with gains -- but you do know that buying breakouts with a strict set of trading rules will make your winners outweigh your losers over the long run.

At the end of the day, breakout trading is as simple as hitting the gas when the stoplight turns green.

This article is commentary by an independent contributor.
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