When the price of assets moves with a particular movement, it warns the traders to find a likely new trading option once it fails that movement.
For example:-For the last 20 days, assume that a stock has traded between $10 and $1, then it moves beyond $11. This difference in movement warns the traders that the perhaps sideways movement has ended and that a potential move from $12 to $13 or some higher has formed.
Breakouts arise from various patterns, including head and shoulders, ranges, and flag patterns. A breakout doesn’t suggest that the price will resume in the expected direction. In that situation, it is called a false breakout.It also shows an opportunity for trading in the opposite direction of the breakout.