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.
Yes, very well put
Red
- #21
- Aug 8, 2010 1:53pm Aug 8, 2010 1:53pm
- Joined Nov 2008 | Status: living deliberately | 11,122 Posts
- #22
- Aug 8, 2010 2:41pm Aug 8, 2010 2:41pm
- Joined Apr 2009 | Status: Live and learn. | 25,161 Posts
"If The Fool persists in his Folly he will become wise." - William Blake
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...
) of some big bank/corporation , then the bigger player would move the market on peak towards them few pips and he can be sure that he will be able to find there enough liquidity to close his position by this SL and cash some cash, if such SL is not there his position closing would be much more difficult and he would lost a lot of cash because of market which will move against him while closing positions ( big buyer which put his offers as a PT somewhere higher will definitely move market down when it reaches such PT and he will lose there - but big SL will provide enough liquidity). Banks often are trying to hide their SL's or to make divide the amount into smaller pieces. One "unnamed" bank maybe five times in last two weeks had a big "unhiden" SL's and you would't believe but it was always hitted with few pips and then it changed direction because of unload of big players, it's like a magnet for them. Now they are more aware and the last time they weren't hit 
- #27
- Aug 8, 2010 3:34pm Aug 8, 2010 3:34pm
- Joined Apr 2009 | Status: Live and learn. | 25,161 Posts
"If The Fool persists in his Folly he will become wise." - William Blake
- #28
- Aug 8, 2010 3:38pm Aug 8, 2010 3:38pm
- Joined Apr 2008 | Status: Parsimony Rulez! | 3,216 Posts
If you look closely, you can see a little bit of the Big Bad Wolf's fur sticking out from under Red's hood. Then you know.
By the way, has anyone got an indicator for that?
- #35
- Aug 8, 2010 4:35pm Aug 8, 2010 4:35pm
- Joined Nov 2008 | Status: living deliberately | 11,122 Posts
Look at the price action during the first dip.
If the dip is quickly retraced it means that there is a solid momentum behind the move.
You can also put a limit order 5 pips at the extreme of the move during the first dip and cancel the order if it's not executed in 5 minutes.
What's more, true, badass breakouts often offer only one retracement. If there are more, that's a weak move.
But all in all, I'd recommend you to learn how to fade false breakouts because they happen much more often than breakouts.
Thank you for the answer !
A couple of questions…
On which time frame is batter to monitor those break outs?
In your opinion, what is behind false and real break out… what is going on there?
Also, what is behind retracement… whats going on there ?
Thanks a lot !!!
Intensity
Thank you for the answer !
A couple of questions…
On which time frame is batter to monitor those break outs?
In your opinion, what is behind false and real break out… what is going on there?
[color=black][font=Verdana]Also,...
False breakouts mainly serve the purpose of weeding out weak hands. Small/naive players run into the move while strong players stay away, when the momentum shows that there isn't any more "weak" fuel, the move is reversed and the weak hands got stopped out.
Now that the market has been cleared of amateurs, at least for a while, pros can start the real breakout. That way, weak players won't slow down their advance and they'll keep most of the gains.
Take today's session for example (see attached 5 min chart) :
- there was a false breakout early in the session that could easily have been "detected" on a 1 min chart because it was so whipsawy.
You could have traded that one in many ways : trading the reversal outright, trading some moving average crossover after the breakout showed it was a fake out, or notice the developing ranging area that indicated there would be a bigger real breakout. Had you taken the last path, you only had to wait for a pin at the upper or lower limit of the range, enter the move and ride it 'til the end.
Pins are an idea taken from the fantastic trader James 16. Check out his work, it's really worth it. He has a giant thread on ForexFactory.
I see retracements as a test of the current trend. Either they succeed and validate the trend, either they fail. They happen when traders take their profits early, either by design or because they are uncertain of the trend. That causes the price to dip, they are out and now the other traders have to decide whether or not they will pursue the current trend. When understood and with a little strategy, retracements are the easiest way to trade. Divergences and pin bars are fantastic tools but retracements can be almost flawless.
Just ask if you want to know something more. And don't take my advice at face value, it's just an excerpt of the experience I have right now and my knowledge grows everyday. Sometimes things I thought were true are not, or only under certain conditions.
Anyway, I wish you luck in your trading
Every timeframe can work, but my favorite one is the 1 min chart. Because PA is more detailed and my robot picks up trade earlier.
False breakouts mainly serve the purpose of weeding out weak hands. Small/naive players run into the move while strong players stay away, when the momentum shows that there isn't any more "weak" fuel, the move is reversed and the weak hands got stopped out.
Now that the market has been cleared of amateurs, at least for a while, pros can start the real breakout. That way, weak players won't slow down their...
