Another important reason for using breakouts, rather than buying low or retracements,
is that trading capital is utilised better. It is the aim of all traders to lock into and hold
trends. The fact is, however, that markets spend most of their time in trading ranges
going nowhere. Many markets don’t trend for months or even years. A trader who takes
a trade in the anticipation that it will move, may have to wait a long time to see the
trade move his way, if it does at all. This can tie up capital for long periods that could
be utilised more productively elsewhere. The big advantage of breakout trading is you
are only entering a trend in motion. As we all know, a trend in motion is more likely to
continue than reverse. This is a basic premise that technical analysis is based upon, and
breakouts get you in, as the trend emerges, and has a high probability of continuing. You
therefore know you are only entering markets that have a high probability of trending
strongly and making you big pro ts.
