It is a price movement outside a predefined support and resistance zone. Breakouts happen under certain market conditions, when asset price either rises above resistance or falls below support.
There are two main types of Forex breakouts:
Most times, when a price breaks a critical level, it goes on in this direction. If this rule works, it is a real breakout. If you decide to follow the direction of a breakout, do it cautiously because you are taking a high risk. Learn more about the peculiarities of trading a real breakout and manage risks before you decide on a trade.
When after the break the price movement goes back to its previous state and fixes there, you deal with a false breakout. As practice shows, false breakouts can occur in the market often enough. If you trade false breakouts, the possibility of a good trade will increase if you trade in the direction of a trend.
Once you learn to determine the signs of the breakouts in the market, you’ll earn extra chances for potentially good trades.