Stock Market Insider: Do Not Play With Institutional Traders
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...
I am going to tell you a stock trading secret that is so powerful, it will save you thousands of dollars. I should know, that is how much it saved me.
Institutional traders use dirty tactics in the stock market that are so bad, they should be illegal.
After reading this article, these dirty tricks might make you angry.
You may even want to forget you ever read this...
Read this entire article...
And you will be happy you did.
Because you will learn an entirely new way of looking at the stock market and in particular false breakouts...
We need to look at what support and resistance lines are and they what false breakouts are.
Learning the how and why resistance lines and support lines form will help protect you against false breakouts.
When investors buy or sell, they form an emotional attachment to the trade. It is emotions that keep a market going higher or sent it into a downtrend.
When a stock takes a plunge, some of the crowd trading the stock will sell for a loss, some of the crowd will sell for a gain, and some of the crowd will hold on to their position.
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.
I am going to give you an example so you can better comprehend what I am talking about here. Say a $40 stock sells off and falls to $35. It then stays at $35 for several weeks. Traders get confident that $35 is "the bottom" the longer this level holds. A trader finally buys the stock at $35. Right after buying, the stock drops to $32. Seasoned traders would have set their stop loss right under the $35 level and so would have exited around $34. Amateur traders will stay in their position refusing to take a loss. They will hold this losing position until the stock finally comes back to $35 where they entered. They eagerly jump at the chance to "get out even". This "get out even" selling will temporarily stall a rally and cause a resistance level to form.
Support and Resistance Lines Are Caused By Regret
Traders whose stock screener has alerted them to a stock that has spiked up will feel regret because they missed the move. If the stock retraces, they will quickly buy the stock for a chance at a second move up. This regret then excitement causes buying which forms a support level.
Take your stock chart and draw resistance and support lines at recent tops and bottoms. You should anticipate the trend to slow down at these levels. Use these support lines and resistance lines to either buy (at support) or to take profits (at resistance).
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.
All stocks are fair game but especially any stock that has a high percentage of institutional ownership.
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.
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.
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. - 23305
I am going to tell you a stock trading secret that is so powerful, it will save you thousands of dollars. I should know, that is how much it saved me.
Institutional traders use dirty tactics in the stock market that are so bad, they should be illegal.
After reading this article, these dirty tricks might make you angry.
You may even want to forget you ever read this...
Read this entire article...
And you will be happy you did.
Because you will learn an entirely new way of looking at the stock market and in particular false breakouts...
We need to look at what support and resistance lines are and they what false breakouts are.
Learning the how and why resistance lines and support lines form will help protect you against false breakouts.
When investors buy or sell, they form an emotional attachment to the trade. It is emotions that keep a market going higher or sent it into a downtrend.
When a stock takes a plunge, some of the crowd trading the stock will sell for a loss, some of the crowd will sell for a gain, and some of the crowd will hold on to their position.
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.
I am going to give you an example so you can better comprehend what I am talking about here. Say a $40 stock sells off and falls to $35. It then stays at $35 for several weeks. Traders get confident that $35 is "the bottom" the longer this level holds. A trader finally buys the stock at $35. Right after buying, the stock drops to $32. Seasoned traders would have set their stop loss right under the $35 level and so would have exited around $34. Amateur traders will stay in their position refusing to take a loss. They will hold this losing position until the stock finally comes back to $35 where they entered. They eagerly jump at the chance to "get out even". This "get out even" selling will temporarily stall a rally and cause a resistance level to form.
Support and Resistance Lines Are Caused By Regret
Traders whose stock screener has alerted them to a stock that has spiked up will feel regret because they missed the move. If the stock retraces, they will quickly buy the stock for a chance at a second move up. This regret then excitement causes buying which forms a support level.
Take your stock chart and draw resistance and support lines at recent tops and bottoms. You should anticipate the trend to slow down at these levels. Use these support lines and resistance lines to either buy (at support) or to take profits (at resistance).
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.
All stocks are fair game but especially any stock that has a high percentage of institutional ownership.
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.
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.
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. - 23305
About the Author:
Written by Steve Wyzeck. To people who want to profitably trade but can not get started go to stock market
posted by Mr. Forex at
6:34 AM
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