Why Do We Have False Breakout | Forex Factory

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Why Do We Have False Breakout

  • #1
  • First Post: Aug 8, 2010 9:47am Aug 8, 2010 9:47am
This tread is discussing about false breakout
THE REASON BEHIND THE FALSE BREAKOUT

ALL IDEAS, THOUGHTS, ADVICES ,AND STRATEGIES ARE WELCOME
  • #2
  • Aug 8, 2010 9:53am Aug 8, 2010 9:53am
To profit from guys like you!
  • #3
  • Aug 8, 2010 9:54am Aug 8, 2010 9:54am
Quoting parazite
to profit from guys like you!
Unfortunatey, I do not trade breakout !
  • #4
  • Aug 8, 2010 10:00am Aug 8, 2010 10:00am
Quoting LaTeCoMeR
THE REASON BEHIND THE FALSE BREAKOUT
i think the reason could be that price begins to break out of a given range, but then certain circumstances cause it to stall and reverse.

or sometimes, SOMETIMES, not stall at all!!
  • #5
  • Aug 8, 2010 10:00am Aug 8, 2010 10:00am
Hmm.. Well... bluffers, mistaken dealers, or just some stop volatility that someone got a good deal on.
  • #6
  • Aug 8, 2010 10:01am Aug 8, 2010 10:01am
but that is sometimes
  • #7
  • Aug 8, 2010 10:04am Aug 8, 2010 10:04am
Good to see you round these parts parazite, how are you doing?
  • #8
  • Aug 8, 2010 10:23am Aug 8, 2010 10:23am
The Big Boys are after your stops!
  • #9
  • Aug 8, 2010 10:23am Aug 8, 2010 10:23am

  1. Big market paticipants force price back to hunt stops. Banks , brokers and hedgefunds
  2. If every breakout was a real breakout then this market would not have existed. Everybody would have profited from them. Making everybody winners.

Technical analysis can work for you and against you. To outsmart the market one must think like the big boys. They know how to take money away from traders.

  • #10
  • Aug 8, 2010 10:52am Aug 8, 2010 10:52am
a lot of times false breakouts are to trigger longs or shorts.......in this situation here, the market wants to get everyone going long by means of this false breakout. So they run price past a resistance point and longs dump sending the market shooting the other way.
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  • #11
  • Aug 8, 2010 11:05am Aug 8, 2010 11:05am
i think you guys might as well answer the question 'why does price move' as that would be not only more relevant but make more sense
  • #12
  • Edited 2:13pm Aug 8, 2010 11:21am | Edited 2:13pm
One reason may be to attract some liquidity. Say you want sell some volume but available liquidity would make you move the market down too much and not get a good average price exposing you risk-wise.

By pushing the market up above the resistance level you attract hordes of breakout traders - providing liquidity that you happily sell into, pushing the market down below the resistance level again. And if you're lucky you get some momentum traders joining the journey down.

After a while it will all fizzle out but you manage to close at an average gain of 15 pips times $500m netting $75K. Not a bad way to squeeze some money out of a quiet market if you have the clout to push price around.
  • #13
  • Aug 8, 2010 11:24am Aug 8, 2010 11:24am
IMHO, I believe false breakouts occur in areas where there is an overwhelming number of orders on one side of the market only. This probably occurs in areas where it is perceived to be a high probability area for 99% of traders.
  • #14
  • Aug 8, 2010 11:27am Aug 8, 2010 11:27am
Quoting LaTeCoMeR
This tread is discussing about false breakout
THE REASON BEHIND THE FALSE BREAKOUT

ALL IDEAS, THOUGHTS, ADVICES ,AND STRATEGIES ARE WELCOME

Thats one method instutions use to trap retail



Red
  • #15
  • Aug 8, 2010 11:27am Aug 8, 2010 11:27am
I think that one reason of a false breakout is this that the breakout was on a weaker support or resistance level and not so far away was a stronger level.After it's on the stronger level the price is quikly turning in the oposite direction.
  • #16
  • Aug 8, 2010 1:36pm Aug 8, 2010 1:36pm
Ok, It seemed you're all gave out smart reasons .

The question is

How do you take advantage of those reasons ?
  • #17
  • Aug 8, 2010 1:39pm Aug 8, 2010 1:39pm
Quoting LaTeCoMeR
Ok, It seemed you're all gave out smart reasons .

The question is

How do you take advantage of those reasons ?

expect the whipsaw OR false breakout to occur and wait for enguilfing patterns for entry



Red
  • #18
  • Aug 8, 2010 1:45pm Aug 8, 2010 1:45pm
Quoting redsword11
expect the whipsaw OR false breakout to occur and wait for enguilfing patterns for entry



Red
Entry what?

Which direction ?

What If. ??????
  • #19
  • Aug 8, 2010 1:49pm Aug 8, 2010 1:49pm
Quoting LaTeCoMeR
Ok, It seemed you're all gave out smart reasons .

The question is

How do you take advantage of those reasons ?
Trade like the Big Boys do.

The market requires false breakouts for liquidity.

Sell at resistance and Buy at Support.

But you still have to know which support/resistance levels
this applies to. It certainly isn't all of them.
  • #20
  • Aug 8, 2010 1:52pm Aug 8, 2010 1:52pm
Quoting FX Compass
Trade like the Big Boys do.

The market requires false breakouts for liquidity.

Sell at resistance and Buy at Support.

But you still have to know which support/resistance levels
this applies to. It certainly isn't all of them.

+A , good point
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