As it is clear from the Post Title that this post is about "How to trade breakouts and fadeouts", because its primarily responsibility of a trade to be well versed with all the technical portion of trading and "breakouts" is at the top of the list. As there are lot of reasons that we may or may not trade that breakouts, I would point out few of them that when you should look to trade or when you should leave those breakouts.
Failed Breakout
The first reason that you should avoid trading is failed breakout and then again looking to trade the opposite way where breakout happens. Failed breakouts is that when price breakout through a range where buyers and sellers battle seems to be at equal level and when price break from the range it retreats back to the range and then it is known as failed breakout. The main reason is to look for what is the overall trend and if that breakouts happen within the trend then the length of breakout candle or it is unusual volatility spike. It is know as failed breakout of the range. As I have mention in my last post that if a trend is matured enough and first sell-off offers pullback entries and the range breakout fails on the next candle then it is usually a trap offer by the bulls and One must think about going long as there are several reasons that trend will reverse. For those who did not look at my earlier post must consider to have a look at it hereVolatility Breakouts
Most of the readers of the blog might have been aware of this concept "Volatility Breakouts" which means unusual spikes out of the ranges also know as elongated candles. In this concept price action is very volatile either due to any unexpected event or lot of new cash fund inflows into the market or a single player or institution dominate the market price and It most of the time lacks momentum on next few candles and traders got trap into the range and when one see such unusual elongated candles out of the range then Price can roam around that candle for few session or even days and that type of candles often work as vaccum in the market and lot of sell stop or buy stop orders might be waiting on the top or below of the candles, So we should always avoid trading these type of Strong candles and wait for further price action specially when it happens on higher time frames as it almost impossible to calculate the risk on such strong breakouts.
From time to time I have posted on my blog that what type of breakouts we should consider taking and type of breakout we should avoid but from know on I would post on weekends of possible setups that we should consider taking a trade if or not that breakout might succeed. I would urge all my readers that they subscribe the blog for every updates as they will receive all the updates through mail in to their box.