The Dirty Tricks Of Professional Traders In The Stock Market
Are you losing money in the stock market because of false breakouts? This article could completely turn around your trading...
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.
Institutional traders use dirty tactics in the stock market that are so bad, they should be illegal.
It might get you angry.
You may even want to forget you ever read this...
Read this entire article...
And I promise you you'll be glad you did.
Because by the time you finish this article you'll have a whole new method for avoiding false breakouts...
First I will talk about what support and resistance lines REALLY are, and then I'll talk about false breakouts.
Seeing why support lines and resistance lines form will help you learn how to better 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 stocks fall, a few traders will exit their position and take profits, a few traders will exit their position for a loss, and a few traders will stay in their position and hold on.
What you see on a chart is the emotional commitment, or lack thereof, coming from the crowd that is trading that stock.
Emotions Are 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.
For example, suppose a stocks falls from $30 down to $25 where it trades for a couple of weeks. The longer the $25 level holds, the more that believe $25 is support. Suddenly, after a couple of weeks of trading at $25, the stock falls down to $20. Smart traders will sell quickly and get out at $24 or $23. Amateur traders will hold on and sit through the entire painful decline. Some amateur traders will get out at $20. Other amateur traders who haven't given up at $20 will be the first to sell when the stock gets back up to $25. They will happily jump at the chance to "get out even." Their selling will temporarily stop a rally and form a resistance level.
Resistance Lines and Support Lines Form From The Emotion Of Regret
Traders who come across a stock that has spiked up feel as if they have "missed the train." If the stock drops back to a certain level, these traders who feel regret for missing the first move will jump at a chance for a second 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
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, attracting more bears just before a rally.
Stocks that have a high percentage of institutional ownership often form false breakouts.
Institutional traders cause these false breakouts to make a ton of money off amateur traders.
All limit orders are displayed on the screens of Institutional traders. They have the exact number of buy orders above a given resistance level.
Institutional traders engage in what is called "running the stops". False breakouts happen when Institutional traders organize hunting parties to run stops.
Take the following example: when a stock is just under resistance at $20, the buy limit orders come flowing in near $18.50. The institutions calculate the liquidity ratio which measures how much the stock will go up if all buy limit orders are executed at $18.50. They calculate that the stock will run to $21 if all the buy limit orders at $18.50 are executed. They short the stock at $20 to push it down to $18.50. At $18.50 they cover their short position and go long as the wave of buy orders are automatically executed pushing the stock up to $21. 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 $20. A false upside breakout will show on your chart.
If you are knocked out of a trade because of a false breakout, do not be afraid to get back into the stock. Amateurs usually make a single run at a stock and stay out if they are stopped out. Professional traders will make several runs at a stock before nailing down the trade they want. - 23226
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.
Institutional traders use dirty tactics in the stock market that are so bad, they should be illegal.
It might get you angry.
You may even want to forget you ever read this...
Read this entire article...
And I promise you you'll be glad you did.
Because by the time you finish this article you'll have a whole new method for avoiding false breakouts...
First I will talk about what support and resistance lines REALLY are, and then I'll talk about false breakouts.
Seeing why support lines and resistance lines form will help you learn how to better 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 stocks fall, a few traders will exit their position and take profits, a few traders will exit their position for a loss, and a few traders will stay in their position and hold on.
What you see on a chart is the emotional commitment, or lack thereof, coming from the crowd that is trading that stock.
Emotions Are 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.
For example, suppose a stocks falls from $30 down to $25 where it trades for a couple of weeks. The longer the $25 level holds, the more that believe $25 is support. Suddenly, after a couple of weeks of trading at $25, the stock falls down to $20. Smart traders will sell quickly and get out at $24 or $23. Amateur traders will hold on and sit through the entire painful decline. Some amateur traders will get out at $20. Other amateur traders who haven't given up at $20 will be the first to sell when the stock gets back up to $25. They will happily jump at the chance to "get out even." Their selling will temporarily stop a rally and form a resistance level.
Resistance Lines and Support Lines Form From The Emotion Of Regret
Traders who come across a stock that has spiked up feel as if they have "missed the train." If the stock drops back to a certain level, these traders who feel regret for missing the first move will jump at a chance for a second 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
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, attracting more bears just before a rally.
Stocks that have a high percentage of institutional ownership often form false breakouts.
Institutional traders cause these false breakouts to make a ton of money off amateur traders.
All limit orders are displayed on the screens of Institutional traders. They have the exact number of buy orders above a given resistance level.
Institutional traders engage in what is called "running the stops". False breakouts happen when Institutional traders organize hunting parties to run stops.
Take the following example: when a stock is just under resistance at $20, the buy limit orders come flowing in near $18.50. The institutions calculate the liquidity ratio which measures how much the stock will go up if all buy limit orders are executed at $18.50. They calculate that the stock will run to $21 if all the buy limit orders at $18.50 are executed. They short the stock at $20 to push it down to $18.50. At $18.50 they cover their short position and go long as the wave of buy orders are automatically executed pushing the stock up to $21. 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 $20. A false upside breakout will show on your chart.
If you are knocked out of a trade because of a false breakout, do not be afraid to get back into the stock. Amateurs usually make a single run at a stock and stay out if they are stopped out. Professional traders will make several runs at a stock before nailing down the trade they want. - 23226
About the Author:
By Steve Wyzeck. When are you finally going to get tired enough of losing money in the stock market to do something about it? To make money stock trading visit stock market
posted by X - Men @ 12:21 AM
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