However, it is difficult to predict the direction of the breakout because buyers and sellers appear to be in perfect balance. Most breakout trading strategies let the market tip its hand as to which way it wants to go before entering. This technique sacrifices initial trade location in exchange for greater confidence that the market will continue to move in the direction of trade entry. This condition differs from the above setups in that volatility has already expanded. On a trend day, a countertrend strategy of fading extreme tick readings could result in substantial losses.
Volatility tends to be more cyclical than price.
Strategies A breakout strategy, or intraday trend-following method, can best capture a trend day. Wait for the market to tip its hand first as to which direction it is going to trend for the day. Rarely can this be determined by the opening price alone. Thus, most breakout strategies enter only after the market has already begun to move in one direction or the other, usually by a predetermined amount. Add the following techniques to your repertoire.