A Breakout is a very important move in technical analysis. It occurs when the price of an asset moves above a resistance area, or moves below a support area. These areas indicate where the buyers and sellers are strongest, so when the price breaks out of these areas it shows that there is greater conviction on one side – which means that the price is more likely to trend in that direction.There are two types of breakouts: continuation and reversal. A continuation breakout happens when the price breaks out in the same direction as it was trending before; for example, if an uptrend has been occurring, then a continuation breakout would be when the price breaks above its previous high to continue moving higher. A reversal breakout happens when the trend changes from up to down or vice versa; for example, if an uptrend has been occurring and then prices falls below its previous low to start moving lower, this would be considered a reversal breakout .Breakouts can occur on high volume (relative to normal volume) or low volume – this just indicates how much conviction there is behind this particular move. When there’s high volume behind a breakout, it usually means that more traders believe that this move will continue rather than reverse course. This increases confidence in trading in that direction and can lead to increased profits.
