Pivot Points Don’t Hold Forever
Just like traditional support and resistance, pivot point levels won't always hold. They can work well in range-bound markets, but eventually, price may break through them. When that happens, you’ll need to be ready with the right tools to take advantage of the breakout.
As mentioned earlier, there are two main ways to trade breakouts:
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The aggressive method: jump in as the level breaks.
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The conservative method: wait for a retest before entering.
Both approaches can work. Just remember — if you choose the safer option and wait for confirmation, you might miss the initial move.
Trading Breakouts with Pivot Points
Let’s check out a 15-minute EUR/USD chart for some examples of breakout trades using pivot points.
In this scenario, EUR/USD started the day by gapping above the pivot point and continued to rally. Price paused at R1, then broke through and jumped about 50 pips higher.
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If you had traded aggressively, you'd have caught the breakout and felt like a World Cup champion. 🏆
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But if you waited for a retest (the conservative method), you’d have missed the move—there was no retest after breaking R1 or even R2.
Later, bulls attempted to push toward R3. However, that breakout failed — a classic fakeout. If your stop was tight, you likely got stopped out.
Eventually, price did break through R3 for real and even retested it before continuing. Later, the market reversed and dropped back below R3, giving another opportunity to trade the "role reversal" — where broken support becomes resistance, and vice versa.
The Role Reversal Principle
When a support level is broken, it often turns into resistance, and a broken resistance level can become new support.
This "role reversal" gives you another way to trade — especially if you're being cautious and prefer waiting for confirmation.
Where to Place Stops and Targets in Breakouts
One challenge with breakout trading is where to place your stop-loss. Unlike range trading, where levels tend to hold, breakouts involve fast, strong moves.
Once a pivot level is broken:
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It may act as the new support or resistance (depending on the direction).
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For example, if price breaks above R1, you could go long and place your stop just below R1.
For profit targets, aim for the next pivot level — R2, R3, etc., if you’re long — or S1, S2 if you’re short.
But keep in mind: it’s rare for price to break through all pivot levels unless there’s a major economic event or surprise news.
Watch for False Breakouts
Breakouts can be risky. Here’s why:
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You don’t know if the breakout will continue. You might enter just as price tops out — a fakeout.
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Volatility spikes during news events. A sudden move might not be a breakout — just a reaction to news.
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Other resistance levels may be lurking. You might see R1 break, but miss a stronger resistance level just above it.
To reduce your risk:
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Combine pivot points with other technical tools — support/resistance zones, candlestick patterns, and momentum indicators.
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Always check the economic calendar to stay ahead of news-related volatility.
Using pivot points in breakout trading can be powerful — but only if you’re prepared for false signals and combine them with smart analysis. In the next lesson, you’ll learn how to take advantage when these levels don’t hold.
Let’s keep building your trading edge!