The most powerful set up to trade:
Failed or a false breakout set-up.
Failed breakouts are 10x more rewarding than trading breakouts or pullbacks.
Collaborated with @AdityaTodmal ๐งต
Failed or a false breakout set-up.
Failed breakouts are 10x more rewarding than trading breakouts or pullbacks.
Collaborated with @AdityaTodmal ๐งต
1/ Failed or false breakouts are more rewarding than trading breakouts.
The reaction to this failed breakout is usually so intense and dramatic because it has trapped investors in the wrong direction.
The reaction to this failed breakout is usually so intense and dramatic because it has trapped investors in the wrong direction.
2/ What is a failed breakout?
A failed breakout is when the price of a security moves beyond a support or resistance level (breakout) but then reverses its course moving back below resistance or above support.
A failed breakout is when the price of a security moves beyond a support or resistance level (breakout) but then reverses its course moving back below resistance or above support.
3/ A breakout is when the price moves through a support or resistance level and keeps moving in that direction.
A failed breakout is when the price moves through a support resistance level, but then fails to continue moving in that direction and instead reverses its course.
A failed breakout is when the price moves through a support resistance level, but then fails to continue moving in that direction and instead reverses its course.
4/ Lets understand with few examples:
Example 1:
Example 1:
5/ Example 2:
6/ Example 3:
7/ Symptoms of a failed breakout:
โข The base is late stage. First- and second-stage bases historically produce the best breakouts. Third-stage bases usually have a mixed record.
โข Fourth-stage and later bases usually fail.
โข The base is late stage. First- and second-stage bases historically produce the best breakouts. Third-stage bases usually have a mixed record.
โข Fourth-stage and later bases usually fail.
8/ Symptoms of a failed breakout continued:
โข Sharp upmove from bottom. If a stock rallies sharply from the lows of the base to new highs, be suspicious. While this looks bullish, parabolic moves usually don't sustain.
โข Sharp upmove from bottom. If a stock rallies sharply from the lows of the base to new highs, be suspicious. While this looks bullish, parabolic moves usually don't sustain.
9/ How to trade failed breakouts or breakdowns:
Lets say you take a trade basis a BO, then the moment it breaks the low of the BO candle, exit the long and initiate the shorts immediately.
Lets say you take a trade basis a BO, then the moment it breaks the low of the BO candle, exit the long and initiate the shorts immediately.
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If you enjoyed this thread:
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