Sharks In The Stock Market
Unleashed on the individual trader for the first time...if you keep getting sniped by false breakouts in the stock market and are losing money, this article could change your stock trading forever...
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.
It might get you angry.
You may even want to forget you ever read this...
But you need to know what they are doing...
And you will be very thankful you did in the long run.
Because after you are done reading this article, you will have new insight into how to spot and avoid false breakouts...
We must define support and resistance and then look at in more depth what false breakouts really are.
Knowing WHY support and resistance lines work will help you protect yourself 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.
Everything you see on a chart is the result of emotions coming from the crowd of people trading that stock.
Pain Is the #1 Reason Why Support and Resistance Lines Form
If a trader is holding on to a stock and hoping that it is going to come back, and it finally does, she is probably going to sell that stock. Staying in that loser of a stock is just too painful as she laments her entry. This selling to relieve the pain will momentarily stop a rally. These painful memories are precisely why support lines and resistance lines form at certain price levels.
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.
Whenever you work with a chart, draw support and resistance lines across recent tops and bottoms. Expect a trend to slow down in those areas, and use them to enter positions or take profits.
Warning: False Breakouts Are Caused By Institutional Traders
A false breakout or false upside breakout is when the price breaks through resistance which causes buyers to come in, and then suddenly reverses and falls back down below the resistance breakout level.
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.
Stocks that have a high percentage of institutional ownership often form false breakouts.
False breakouts provide institutional traders with most of their best trading opportunities which is why institutional traders most often are the ones who cause these patterns to form in charts.
Institutional traders have access to all limit orders. They know how many more buy orders are above a resistance level.
Institutional traders engage in what is called "running the stops". False breakouts happen when Institutional traders organize hunting parties 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. - 23223
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.
It might get you angry.
You may even want to forget you ever read this...
But you need to know what they are doing...
And you will be very thankful you did in the long run.
Because after you are done reading this article, you will have new insight into how to spot and avoid false breakouts...
We must define support and resistance and then look at in more depth what false breakouts really are.
Knowing WHY support and resistance lines work will help you protect yourself 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.
Everything you see on a chart is the result of emotions coming from the crowd of people trading that stock.
Pain Is the #1 Reason Why Support and Resistance Lines Form
If a trader is holding on to a stock and hoping that it is going to come back, and it finally does, she is probably going to sell that stock. Staying in that loser of a stock is just too painful as she laments her entry. This selling to relieve the pain will momentarily stop a rally. These painful memories are precisely why support lines and resistance lines form at certain price levels.
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.
Whenever you work with a chart, draw support and resistance lines across recent tops and bottoms. Expect a trend to slow down in those areas, and use them to enter positions or take profits.
Warning: False Breakouts Are Caused By Institutional Traders
A false breakout or false upside breakout is when the price breaks through resistance which causes buyers to come in, and then suddenly reverses and falls back down below the resistance breakout level.
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.
Stocks that have a high percentage of institutional ownership often form false breakouts.
False breakouts provide institutional traders with most of their best trading opportunities which is why institutional traders most often are the ones who cause these patterns to form in charts.
Institutional traders have access to all limit orders. They know how many more buy orders are above a resistance level.
Institutional traders engage in what is called "running the stops". False breakouts happen when Institutional traders organize hunting parties 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. - 23223
posted by X - Men @ 3:58 AM
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