Breakouts have worked and will continue to work as
they take advantage of human psychology, and the
fact that the vast majority of traders are not prepared
to act decisively as a potential new trend develops.
The fact that breakout trading is so simple does not
diminish its potential to make large pro ts over time.
In fact its simplicity, as we have seen, is its strength,
despite subtle changes in the markets. Over the years,
breakouts continues to work because the underlying
premise on which it is based (human nature) remains
constant. There is no correlation in the market between the complexity of an indicator
or method and its success. In fact, the opposite is true; most of worlds top traders
who have made consistent pro ts have used systems that are essentially simple. Simple
systems are the best because their logic is easy to understand and implement. If the
system is easy to understand it is easier for a trader to execute it with discipline. There
is no point in having a system unless you have con dence in it to trade it with discipline,
even when faced by a losing run of trades.
Trading breakouts is a great method for catching the really big moves that can pile up
big pro ts - that is the aim of all traders. Every trader could use a breakout system if
they wanted to, the fact is they don’t, for reasons stated earlier. The fact that the bulk
of traders don’t want to is the fundamental reason why they work and will continue to
do so.
