Breakout
A breakout is price going beyond a level and closing there. If it only clipped it with a wick and came back, that's not a break.
Breakout — what it is?
A breakout is price moving beyond a level with a candle closing there. The key word is "closing": a wick piercing the level doesn't count as a break, because it doesn't show who held price by the end of the period.
A real breakout is usually impulsive: a wide candle, continuation behind it, often with an imbalance. It changes structure and is confirmed by price not coming back beyond the level.
A false breakout looks the same in the moment but ends with a quick return inside. You can't tell them apart before the fact — you can only wait for the close and the reaction.
Breakout — how it is built?
There's one rule with no exceptions: a break requires a candle to close beyond the level on the working timeframe. Everything else is a piercing, and it more often means liquidity being taken than a move beginning.
Breakout — common mistakes
Entering on a wick piercing without waiting for the close.
Entering at market at the moment of the break. That's an entry at the worst price and with the widest stop.
Treating any break as the start of a trend: without a break of structure it's just a move.
Ignoring where price came from. A break after a long move is weaker than a break after accumulation.
Related to
Glossary
- candle
- the element of the chart that shows four prices for a period: open, high, low, close.
- wick
- the thin lines above and below the body that show the high and the low of the period.
- imbalance
- a stretch of chart price went through too quickly, without even trading.
- False breakout
- price leaving a level and coming straight back. In Smart Money it is treated as a way of collecting liquidity.
- close
- the last price of the period. Considered the most important of the four: breakouts are confirmed by the close.
- timeframe
- the period one candle holds: M5 is five minutes, H1 an hour, D1 a day.
Test yourself
Where did the breakout hold — price closed beyond the level?
Correct. The app has tasks like this in every lesson — 119 lessons on real charts. Solve in the app →
Not this one. The right answer is the other chart. The app has tasks like this in every lesson — 119 lessons on real charts. Solve in the app →