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Maximizing Profits with the Previous Day High Low Breakout Strategy
Source: | Author:finance-102 | Date2023-07-14 | 459 Views | Share:
In the world of day trading, there are numerous strategies available to traders seeking high-profit potential. One such strategy is the Previous Day High Low Breakout Strategy. This technique revolves around identifying trends and capitalizing on significant price movements based on the previous day's high and low levels. While this approach can be complex for beginners, its potential rewards make it an attractive option for experienced traders. In this article, we will delve into the details of the Previous Day High Low Breakout Strategy and explore how it can be employed effectively.

Understanding the Previous Day High Low Breakout Strategy:

The essence of the Previous Day High Low Breakout Strategy lies in spotting opportunities for traders to enter into 

long or short positions by observing the price action of a security in relation to its previous day's high and low 

points. The strategy assumes that if the price breaks above the previous day's high, it indicates a bullish trend, 

while a break below the previous day's low suggests a bearish trend.


Implementing the Strategy:

To implement this strategy effectively, traders need to follow a structured approach that involves several key steps:


  • Identify the Trend:

    Before applying the Previous Day High Low Breakout Strategy, it is crucial to determine the overall trend in the

    market. This can be done by analyzing price charts, trend indicators, or moving averages. Understanding the

    trend will help traders align their positions with the broader market sentiment.

  • Define the Previous Day's High and Low Levels:

    Once the trend is established, traders need to identify the highest and lowest price levels reached during the

    previous trading session. These levels will serve as the breakout points for initiating trades.

  • Set Entry and Exit Points:

    Based on the breakout points, traders can set their entry and exit levels. If the price breaks above the previous

    day's high, traders may consider entering a long position. Conversely, if the price breaks below the previous day's

    low, short positions can be considered. Setting stop-loss orders is crucial to manage risk and protect against

    adverse market movements.

  • Confirm with Volume and Indicators:

    To increase the reliability of the breakout, traders can look for confirmation signals from volume analysis and

    technical indicators. Higher trading volume accompanying the breakout strengthens the likelihood of a sustained

    trend.

  • Manage Risk and Position Sizing:

    Proper risk management is essential in any trading strategy. Traders should determine their risk tolerance and set

    appropriate position sizes accordingly. Implementing a trailing stop-loss strategy can also help lock in profits as the

    trend progresses.

  • Monitor and Adjust:

    Constant monitoring of the trade is necessary to evaluate its progress.

    Traders may consider adjusting their stop-loss levels or taking partial profits as the trade develops.


The Previous Day High Low Breakout Strategy offers day traders a method to identify and capitalize on significant price 

movements in the market. While it may be complex for beginners due to the need for technical analysis and swift decision

-making, the potential profits make it an appealing approach for experienced traders. By understanding market trends, 

defining breakout points, confirming signals, managing risk, and adapting as needed, traders can increase their chances 

of success with this strategy. As with any trading strategy, it is essential to practice risk management and thoroughly 

backtest and evaluate the strategy's performance before implementing it in live trading.


Remember, trading involves risks, and no strategy guarantees consistent profits. It is advisable to seek guidance from 

financial professionals and gain practical experience before engaging in active trading activities.


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