Breakout
What does it mean when price leaves a range it had been stuck in, and how do you tell one from noise?
In plain words
A breakout is when price moves beyond a range it had been trading inside, then stays outside that range. The old ceiling becomes a floor, or the old floor gives way. It is confirmed by holding the move, not by touching the edge once.
Why it matters
Traders use breakouts as entry signals and to place stops just inside the abandoned range. If the move does not hold, the position is wrong at the first sign. Breakouts on heavier-than-usual volume are more often genuine than quiet ones.
In a real week: BTC, week of 6 May 2019
In the week of 6 May 2019, BTC opened at 5773.18 and closed at 6967.31, up 20.68%, after a weekly low of 5619.14 on Monday and a high of 7521.78 on Sunday. Trading volume ran 2.05 times its prior 12-week average. The close sat at 70.9% of the week's range, in the upper third, and the weekly return ranked in the 95th percentile of the 64 weeks of history.
A common mistake
Treating any new high as a breakout. A move that touches the edge of the range and falls back inside is a failed breakout, and volume and follow-through separate the two.