Breakout failures: how often do they really fail?

[Shadow Trader]

The word on the street says most breakouts fail. Is it true, and does it depend on definition?

A fair test needs a precise definition. For example: price closes a one-minute candle at least one pip beyond the high of the previous 30 candles. Success: price travels another five pips in the direction before returning to the breakout level. Failure: the reverse.

Run that over several months on one pair and the outcome might be around 40 to 55% successes, depending on session and volatility. The true figure shifts with the filters applied. Breakouts during the London open, after a period of compression, tend to look better than breakouts in a quiet afternoon.

Nothing here is a verdict on breakouts in general. It's a reminder that the rate of failure is a number that can be measured, and a strategy only needs the numbers to line up with costs.

Defining the sample precisely also stops the common mistake of counting only breakouts that look good in hindsight. Marking every candidate automatically, before looking at what happened next, keeps the count honest. The failure rate that emerges is usually less dramatic than either camp claims, and depends heavily on session, pair and filter.

What breakout failure rate has been measured on a specific definition, and which filters improved it the most?