Forex glossary
Breakout
A breakout is a move beyond previously defined support, resistance or a range boundary. A strategy may require a candle close or a specified buffer to recognize it. Crossing a level does not guarantee continuation; a return into the range can invalidate the setup.
Illustrative example
How does it work in practice?
Assume EUR/USD resistance at 1.1000 and a rule requiring an H1 close above it. A close at 1.1008 meets the breakout criterion, although the next candle may still return below resistance.
A case to work through
A buffered breakout
Hypothetical EUR/USD resistance is 1.2000; the required close is at least 5 pips above it.
- High=1.2009 and close=1.2003 cross the level, but the close remains below 1.2005.
- A wick meets a different condition from the specified buffered close.
What follows? Do not classify this candle as a confirmed breakout under this rule.
Example boundary: A buffer is a strategy assumption and cannot eliminate later returns below the level.
A useful distinction
Breakout / Fakeout
Breakout describes moving beyond a boundary; fakeout requires a subsequent return under a specified criterion.
Check your understanding
Apply a breakout buffer to the closing price.
Show the answer and explanation
No; at least 1.2005 is required
The close is only 3 pips above the level.
From observations to price structure
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Related terms
Sources and documentation
- StockCharts – support and resistance
Reaction zones, break criteria and possible role reversal of levels.
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