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In trading, a breakout refers to when the price of a currency, stock, commodity suddenly moves outside a previously defined level of support and resistance. In other words, it is when an asset price ‘breaks out’ of bounds after being stuck at a level for a period. Breakouts are often followed by a surge in trading volume, as traders have a newfound interest in the asset at the new price level. This is because for many traders, a breakout is a potential sign of a new trend or market momentum, encouraging many to open trades.
A stock’s price has been trading within the range of $60 and $70 for a few months, but it suddenly breaks through the upper resistance level of $70 and continues to rise. This could be a sign that there has been a shift in market sentiment and a newfound increased demand for the stock, which can potentially lead to further increase in the price. Traders wishing to capitalise on this will enter a long position with the aim to make a profit from the stock’s appreciation.
While breakouts can be useful for traders to identify new trends and potentially make high profits, they can carry risks. Some may lead to false signals or there may be unexpected reversals in the market, leading traders to incur losses if they are not vigilant. Therefore, traders should always have a risk management strategy in place when trading, and they should consider multiple factors such as market conditions, volatility, and investor sentiment before trading.
ADSS offers a range of global markets for traders, with opportunities in indices, commodities, forex, equities and more. We also feature tutorials, how-to guides, and weekly webinars to help you navigate the financial markets and find better trading opportunities. You can start trading and investing online by opening a live trading or demo trading account.
See all glossary trading terms
ADSS
8th floor, CI Tower
Corniche Road
PO Box 93894
Abu Dhabi
United Arab Emirates
Trading Services
ts@adss.com
+971 2 657 2414
Investing in CFDs involves a high degree of risk that you will lose your money due to the use of leverage, particularly in fast moving markets, where a relatively small movement in the price can lead to a proportionately larger movement in the value of your investment. This can result in loses that exceed the funds in your account. You should consider whether you understand how CFDs work and you should seek independent advice if necessary.
ADS Securities LLC – S.P.C (“ADSS”) is authorised and regulated by the Securities and Commodities Authority (“SCA”) in the United Arab Emirates under First Category: Dealing in Securities and Fifth category: Arrangement and advice (Introduction). ADSS is a Limited Liability Company – Sole Proprietorship Company incorporated under United Arab Emirates law. The company is registered with the Department of Economic Development of Abu Dhabi (No. 1190047) and has its principal place of business at 8th Floor, CI Tower, Corniche Road, P.O. Box 93894, Abu Dhabi, United Arab Emirates.
The information presented is not directed at residents of any particular country outside the United Arab Emirates and is not intended for distribution to, or use by, any person in any country where the distribution or use is contrary to local law or regulation.
ADSS is an execution only service provider and does not provide advice. ADSS may publish general market commentary from time to time. Where it does, the material published does not constitute advice, or a solicitation, or a recommendation to a transaction in any financial instrument. ADSS accepts no responsibility for any use of the content presented and any consequences of that use. No representation or warranty is given as to the completeness of this information. Anyone acting on the information provided does so at their own risk.
