When price moves decisively beyond a defined support or resistance level.
A breakout occurs when price pushes through a level that previously contained it. Breakouts can happen above resistance (bullish) or below support (bearish). They are often accompanied by increased volume and volatility. Not all breakouts sustain — failed breakouts (fakeouts) are common.
Breakouts signal that the balance between buyers and sellers has shifted. A genuine breakout above resistance suggests buyers have overwhelmed sellers, often leading to accelerated price movement. Traders use breakouts to enter trades in the direction of the new momentum.
A currency pair has been ranging between 1.1000 and 1.1100 for two weeks. When price breaks above 1.1100 with a strong candle and high volume, breakout traders enter long positions, expecting price to continue higher.
Price consolidates below resistance, then breaks out above it with momentum — a bullish breakout signal.