Swim Clear Of The Sharks In The Stock Market
Revealed for the first time... if you are losing money because of false breakouts in the stock market then you need to read this entire article.
This behind closed doors secret about institutional traders will save you from being ambushed. This secret has saved me thousands of dollars and now I'm breaking my silence to show you how to do the same.
You are about to learn a low down dirty trick that institutional traders use against you.
After reading this article, these dirty tricks might make you angry.
You may even want to forget you ever read this...
But I'll make you a promise - stick with it, hear me out...
And I promise you you'll be glad you did.
Because you will learn an entirely new way of looking at the stock market and in particular false breakouts...
We must define support and resistance and then look at in more depth what false breakouts really are.
Learning the how and why resistance lines and support lines form will help protect you against false breakouts.
When traders buy and sell a stock, they commit emotion to the trade. It is their emotions that will keep a market trending higher or send it into a reversal.
When a stock falls, some traders jump out and book profits, some traders jump out and take losses, and some traders hold on.
What you see on a chart is the emotional commitment, or lack thereof, coming from the crowd that is trading that stock.
The Main Reason Support And Resistance Lines Form Is From Pain
If someone trading a stock is still holding that stock when the price finally comes back to their cost basis, they are likely going to sell. It is painful to be in this stock and the trader simply wants to get out. This pain relief will temporarily stop a rally. These painful memories are why support and resistance lines form.
Let us say that a $20 stock drops down to $18 and stays there for a few weeks. The longer the $18 level holds, the more that traders believe that this is a good support level and buy the stock. Now right after buying, the stock falls to $15. Skilled traders will sell quickly and exit their position at $17 or at $16. Amateur traders will stay in their losing position until, one day, it rises back to their original entry level at $18. They will then sell this stock never to return. They eagerly jump out at the chance to "get out even". Their selling will temporarily stop a rally and form a resistance level.
Support and Resistance Lines Are Caused By Regret
Traders who discover a stock that has spiked up feel like they have "missed the gravy train". When the stock falls back to a certain level, the traders who felt regret at missing the first spike up are eager to jump in for a chance at a second spike up or upward move. Their buying forms a support level.
When you study a chart, draw support lines and resistance lines at recent bottoms and tops. You should expect the trend to slow down at these levels. Use support and resistance lines to enter positions or to book profits.
Warning: False Breakouts Are Caused By Institutional Traders
When the market rises about resistance and pulls in new buyers and then suddenly reverses and falls back below that resistance, this is called a false breakout.
A false downside breakout happens when a stock falls below support. The bears jump in and short the stock. Suddenly the stock reverses and heads back up retaking the broken support level.
Any stock chart can form false breakouts but be especially careful of any stock that has a high percentage of institutional ownership.
Institutional traders cause these false breakouts to make a ton of money off amateur traders.
Institutional traders can see all the limit orders for a given security. You and I do not have access to this information. They know exactly how many buy orders are waiting to be automatically executed above a certain resistance level.
What institutional traders will do next is what is known in secret, behind closed door circles, as "running the stops". A false breakout occurs when the institutions organize a hunting expedition to run stops.
For example, when a stock is slightly below its resistance at $30, the buy limit orders come flowing in near $28.50. The institutions calculate the liquidity ratio which measures how much the stock will go up if all buy limit orders are executed at $28.50. They calculate that the stock will run to $31 if all the buy limit orders at $28.50 are executed. They short the stock at $30 to push it down to $28.50. At $28.50 they cover their short position and go long as the wave of buy orders are automatically executed pushing the stock up to $31. If greedy traders start piling in, the institutional trader will stay long the trade. As soon as the buy orders start drying up, they sell short and the price falls back below $30. That's when your chart shows a false upside breakout.
False breakouts will knock you out of a trade. But don't do what most amateur traders do which is to take a single run at a stock and once stopped out, go bipolar and say the stock is bad and never return. Obviously there was something you fundamentally liked about the stock in the first place and that has not changed. Professional traders will take several runs at a stock until finally nailing down the trade they want. - 23212
This behind closed doors secret about institutional traders will save you from being ambushed. This secret has saved me thousands of dollars and now I'm breaking my silence to show you how to do the same.
You are about to learn a low down dirty trick that institutional traders use against you.
After reading this article, these dirty tricks might make you angry.
You may even want to forget you ever read this...
But I'll make you a promise - stick with it, hear me out...
And I promise you you'll be glad you did.
Because you will learn an entirely new way of looking at the stock market and in particular false breakouts...
We must define support and resistance and then look at in more depth what false breakouts really are.
Learning the how and why resistance lines and support lines form will help protect you against false breakouts.
When traders buy and sell a stock, they commit emotion to the trade. It is their emotions that will keep a market trending higher or send it into a reversal.
When a stock falls, some traders jump out and book profits, some traders jump out and take losses, and some traders hold on.
What you see on a chart is the emotional commitment, or lack thereof, coming from the crowd that is trading that stock.
The Main Reason Support And Resistance Lines Form Is From Pain
If someone trading a stock is still holding that stock when the price finally comes back to their cost basis, they are likely going to sell. It is painful to be in this stock and the trader simply wants to get out. This pain relief will temporarily stop a rally. These painful memories are why support and resistance lines form.
Let us say that a $20 stock drops down to $18 and stays there for a few weeks. The longer the $18 level holds, the more that traders believe that this is a good support level and buy the stock. Now right after buying, the stock falls to $15. Skilled traders will sell quickly and exit their position at $17 or at $16. Amateur traders will stay in their losing position until, one day, it rises back to their original entry level at $18. They will then sell this stock never to return. They eagerly jump out at the chance to "get out even". Their selling will temporarily stop a rally and form a resistance level.
Support and Resistance Lines Are Caused By Regret
Traders who discover a stock that has spiked up feel like they have "missed the gravy train". When the stock falls back to a certain level, the traders who felt regret at missing the first spike up are eager to jump in for a chance at a second spike up or upward move. Their buying forms a support level.
When you study a chart, draw support lines and resistance lines at recent bottoms and tops. You should expect the trend to slow down at these levels. Use support and resistance lines to enter positions or to book profits.
Warning: False Breakouts Are Caused By Institutional Traders
When the market rises about resistance and pulls in new buyers and then suddenly reverses and falls back below that resistance, this is called a false breakout.
A false downside breakout happens when a stock falls below support. The bears jump in and short the stock. Suddenly the stock reverses and heads back up retaking the broken support level.
Any stock chart can form false breakouts but be especially careful of any stock that has a high percentage of institutional ownership.
Institutional traders cause these false breakouts to make a ton of money off amateur traders.
Institutional traders can see all the limit orders for a given security. You and I do not have access to this information. They know exactly how many buy orders are waiting to be automatically executed above a certain resistance level.
What institutional traders will do next is what is known in secret, behind closed door circles, as "running the stops". A false breakout occurs when the institutions organize a hunting expedition to run stops.
For example, when a stock is slightly below its resistance at $30, the buy limit orders come flowing in near $28.50. The institutions calculate the liquidity ratio which measures how much the stock will go up if all buy limit orders are executed at $28.50. They calculate that the stock will run to $31 if all the buy limit orders at $28.50 are executed. They short the stock at $30 to push it down to $28.50. At $28.50 they cover their short position and go long as the wave of buy orders are automatically executed pushing the stock up to $31. If greedy traders start piling in, the institutional trader will stay long the trade. As soon as the buy orders start drying up, they sell short and the price falls back below $30. That's when your chart shows a false upside breakout.
False breakouts will knock you out of a trade. But don't do what most amateur traders do which is to take a single run at a stock and once stopped out, go bipolar and say the stock is bad and never return. Obviously there was something you fundamentally liked about the stock in the first place and that has not changed. Professional traders will take several runs at a stock until finally nailing down the trade they want. - 23212
posted by X - Men @ 2:47 AM
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