Range Expansion
Breakout Setup
Trade price breaking through key support or resistance levels with momentum.
How It Works
A breakout occurs when price moves beyond a well-defined support or resistance level with enough momentum to sustain the move. Breakouts typically happen after periods of consolidation where price is 'coiling' in a tight range.
The key is confirmation — not every push through a level is a true breakout. Volume, candle close beyond the level, and a retest of the broken level as new support/resistance all increase probability.
False breakouts (fakeouts) are common, especially during low-volume sessions. Always wait for a candle close beyond the level before entering, and place stops on the opposite side of the range.
Ideal Conditions
- Price has been consolidating for multiple sessions
- Clear, well-tested support/resistance level
- Volume increasing on the breakout candle
- London or New York session (higher volatility)
- No major news events in the next 30 minutes
Entry Rules
- 1Wait for a candle close above resistance (buy) or below support (sell)
- 2Enter on the next candle open or on a retest of the broken level
- 3Confirm with higher timeframe trend direction
- 4Volume should be above average on the breakout bar
Invalidation — When to Stay Out
- Price closes back inside the range within 2 candles
- Breakout candle has a long wick (rejection signal)
- Volume is declining during the breakout
- Breakout occurs against higher-timeframe trend
Risk Management Tips
- Stop loss just inside the range (below broken resistance or above broken support)
- Risk no more than 1-2% of account per trade
- Take partial profits at 1:1 RR and trail the rest
- Avoid breakouts during Asian session — low volume = more fakeouts
Examples
EUR/USD London Breakout
Price consolidates during Asian session in a 30-pip range. At London open, EUR/USD breaks above resistance with a strong bullish candle. Entry on break, stop below range, target 1.5× the range width.
Gold Triangle Breakout
XAUUSD forms a symmetrical triangle over 3 days. Price breaks above the upper trendline with volume spike. Target measured move equals the height of the triangle.
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