Trading Breakouts with Stop-Loss Entry Orders

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Trading Breakouts with Stop-Loss Entry Orders

For a likely breakout point in any range breakout, you can use a resting stop-loss entry order placed just beyond the breakout level(buffer of 0.0025% that is 0.5 for 200 rs) to get into a position if a break occurs.

Two scenarios

1.To get long for a break to the upside breakout

We would leave a stop-loss entry order to buy at a price just above the upper level of the range or pattern (market stop loss) . There can be some slippage with market stop loss. But with limit stop loss the order may not get executed at all if in high momentum.

2. To get short for a breakout at lower end

We would leave a stop-loss entry order to sell at a price just below the lower level of the range or pattern. There can be some slippage with market stop loss to catch breakouts. But with limit stop loss the order may not get executed at all if in high momentum.

Conclusion:

The main use of stop-loss entry orders is that we will be able to trade the breakout without any further action on your part like waiting for breakouts and entering trades within seconds or minutes to catch the train.

“Often Breakouts can occur in the blink of an eye.”

It can be just when the upper range level will be looking like it’s going to hold and prices started to drift off, for example, they’ll come roaring back and blow right through the breakout level.

Market is a beauty on it’s own. Price moves can happen in any direction and breakouts like range breakouts can leave the most experienced traders caught. By the time traders have time to react, the break has already seen prices jump well beyond their desired entry level.

Note:

1. Placing a stop-loss entry order to trade a breakout level should be avoided around any major data or news events that are coming up.

2. Once order is executed, do not forget to place a stop loss to manage your risk where the breakout fails. That is sell stop loss order below breakout value after the above order execution for a buy.

Vamshi B