Breakout
Also called: Breakout, Level break, Breakout and retest, Kırılım
A close beyond a support, resistance or range edge with a candle body; it shows the balance at that level has broken.
4 min read · one puzzle on the page
What does a breakout tell you?
A breakout is price moving past a level it couldn't cross for a long time and closing there. The level can be resistance, support, the edge of a sideways range or a trendline. What matters is that the balance of buyers and sellers stacked at that level tips to one side.
If a resistance holds for a while, there are more people wanting to sell there than to buy. When price closes above it, you're seeing that selling dry up and new buyers accept higher prices. The same logic works in reverse for support.
A breakout is defined by a close, not a touch. A wick poking beyond the level may only show that the stops waiting there were taken. Until the body closes on the far side, you have an attempt, not a breakout.
How do you recognise a real breakout?
The first test is the close. Say a stock has stayed below 186.40 for days, and finally a candle closes at 187.10. A close 70 cents above the level with a clear body is the first confirmation. If the candle closed at 186.50 and left a long upper wick, the level may still be holding.
The second test is the candle's character. In a real breakout the candle is usually longer than average, with a big body and a close near its high. Volume rises too: crossing a level takes a lot of trading. A breakout on a small-bodied candle with wicks on both ends is indecisive.
The third test is what happens next. Price often comes back to the level it broke and tests it again. This is called a retest. The broken resistance now acts as support: price returns to 186.40, meets lower wicks and turns up. That is often the clearest sign the breakout was real.
If you enter on the retest, the stop goes a little below the broken level. A close back below 186.40 breaks the idea. With the retest entry at 186.60 and the stop at 186.10, the risk is 50 cents; that distance is your 1R.
Try it on a chart
This chart ends just as price closes below the previous low with a strong body: the breakout is happening right now. Think about whether you'd go with it, against it, or wait; where the stop would go and the chance of price returning to the broken level should shape your call.
Price dropped below the previous low; the candle closed below it with a strong body. What's your call?
No sign-up needed. Take a guess; when the chart opens, you'll see why.
The most common breakout mistake
Chasing the breakout candle. When a long breakout candle prints, the urge to jump in is strong. But buying near its high with the stop below the level multiplies the distance, and when price comes back for the retest, the trade is underwater right away.
Trading against the breakout. Because the level held for so long, many people assume the break is fake too and go the other way. Standing directly in front of a breakout that closed with a body and rising volume means defending a level that no longer holds.
Counting a wick as a breakout. A candle that pokes beyond the level but closes back inside is usually a liquidity grab, not a breakout. Traders who enter on that wick tend to end up caught in the move that reverses straight back.
When does a breakout fail?
If price can't hold beyond the level, the breakout fails. When a candle closes past the level and the very next one closes back inside, that's a false breakout, and it often brings a sharp move the other way.
Breakouts right before an important data release or earnings report are unreliable. The market trades thin while it waits; when the number lands, price can erase the breakout's direction in a few candles.
If another level sits just beyond the break, the room is tight. Resistance broke, but a bigger one waits 40 cents higher: a trade with a 50-cent stop is under 1R before it starts.
Frequently asked questions
Should you wait for a close, or is a wick enough for a breakout?
Wait for the close. If the wick goes past the level and the candle closes back inside, that isn't a breakout but usually a sweep: the stops waiting there were taken and price was pushed back. A breakout is confirmed by the candle body closing on the far side of the level. Even when the small timeframe shows a close, be careful if the higher timeframe candle is still open.
What is a retest, and does it always follow a breakout?
A retest is price returning to the level it broke and testing it from the other side: broken resistance becomes support, broken support becomes resistance. It follows most breakouts, but not all. Very strong, news-driven breakouts can run away without coming back. Waiting for the retest means missing some moves, but it gives a shorter stop and a cleaner entry.
How do you tell a real breakout from a false one?
In a real breakout the candle closes beyond the level with a strong body, volume rises, and when price comes back it holds on the far side. In a false breakout price crosses the level but can't stay: it soon returns and closes inside the old range. It's hard to separate the two from a single candle; how price behaves on the retest gives the clearest clue.
