TRADING SYSTEM - Breakout Systems

  A breakout system attempts to overcome the limitation of trend-following systems by trading only when the market overcomes a predetermined resistance point (buy breakout) or falls below a predetermined support point (sell breakout).  These systems tend to be considerably more accurate than do trend-following systems, and they tend to product larger average profits.

Strength and Weaknesses of Breakout Systems

  Breakout systems are also subject to certain limitations.   They can be victims of false breakouts.  If, however, the logic used in defining a breakout for the purpose of generating a signal is faulty, then there will be numerous false signals.  Notwithstanding these limitations, breakout systems are particularly effective in today's volatile markets, such as the Crude Palm Oil futures.   A real example of how you can make 144 points or RM3600 in just 8 days is shown in the chart below: