What Is a Breakout

The lid

A breakout is a close beyond a level the price had stopped at before. On 27 January 2025 the euro against the dollar made a high of 1.05329. On 14 February the price rose to within 19 pips of it and turned down — a pip being the fourth decimal place, the smallest step most people count in — and on 26 February it stopped four pips short. The high had become a lid. On 4 March the day closed at 1.06254, 93 pips above the lid. That close is the breakout.

The close, not the wick

Two candles can both go over the line, and only one is a breakout. A candle whose wick — the thin line beyond the body — reaches over the level and whose close comes back under it has tested the level; the price went there and did not stay. A candle that closes over the level has broken it. The word is about where the period ended, not about where it went during the period. So a breakout is read on the close — of the hour on an hourly chart, of the day on a daily one — and never on the wick.

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