Breakouts occur when price has been range-bound for a period of time as bulls and bears battle to dictate the direction of the trend. Breakouts can either represent a continuation of the trend, after a period of consolidation which results in the formation of a rectangle chart pattern or at the end of a move higher or lower as a reversal. They can be seen on most timeframes and often result in price moving sharply higher or lower as either bulls or bears finally get the upper-hand. The general rule of breakout trading is that the longer the period of consolidation the more powerful the breakout is likely to be. Having said this, forex traders need to be wary of the potential for “false breakouts” which leave traders trapped on a break which quickly reverses and moves in the opposite direction.