FALSE BREAKOUTS (MARKET DECEPTION)
All Warfare Is Based Upon Deception: This was spoke by the 6th century Chinese general Sun Tzu. "All my rules in trading and the foundation of my trading plan itself is based off the book The Art Of War". So how do I apply this quote to the markets:
The goal in trading is to accurately predict the future price of an asset and to profit off your predictions. Theres only 2 types of analysis, funcomentol and technical so there are 2 areas we can find market deception, one side deceiving another for financial gains. In fundamentals, market deception is found within companies and centrolbanks. In technical analysis It found in false breakouts and here's why:
False breakouts happen when the market is in a consolidation or a range usually after a trending move ending at a support or esistance. It is a time of low volatility. after awhile of consolidation or ranging there will be a breakout and this breakout could be considered as ether a reversal or continuation of the overall trend. the deception is when price breaks out all the breakout traders are buying or selling into that direction. where's the logical stop loss level in this type of trade 9 times out of 10 above or below a previous high or low. unforchunatly the market makers and quants know that, so they slam price back the other way taking out all the stops in its path. (If you bought a breakout you're stop would be a sell order enough of these sell orders in one location once triggered would act like a push to a large boulder downhill.)
In conclusion this is a deceptive move for market makers, Proprietary traders and quants, the so called smart money to add liquidity to the markets and of course make profits for themselves on the losses of others which is what trading is all about.
NOTE:
There's 2 types of false breaks, first being the above described based on deception which happens in a low volatility and the second are false breaks that happen in high volatility like in a very choppy market.The second I don't pay much mind to because I don't trade in choppy markets. The first, on the other hand is very important to watch for in low volatility at key support and resistance levels. being able to spot false breaks gives you the ability to utilise them and if caught in one and faked out of the trade, the understand of why gives you the ability to turn a disadvantage into an advantage.
The goal in trading is to accurately predict the future price of an asset and to profit off your predictions. Theres only 2 types of analysis, funcomentol and technical so there are 2 areas we can find market deception, one side deceiving another for financial gains. In fundamentals, market deception is found within companies and centrolbanks. In technical analysis It found in false breakouts and here's why:
False breakouts happen when the market is in a consolidation or a range usually after a trending move ending at a support or esistance. It is a time of low volatility. after awhile of consolidation or ranging there will be a breakout and this breakout could be considered as ether a reversal or continuation of the overall trend. the deception is when price breaks out all the breakout traders are buying or selling into that direction. where's the logical stop loss level in this type of trade 9 times out of 10 above or below a previous high or low. unforchunatly the market makers and quants know that, so they slam price back the other way taking out all the stops in its path. (If you bought a breakout you're stop would be a sell order enough of these sell orders in one location once triggered would act like a push to a large boulder downhill.)
In conclusion this is a deceptive move for market makers, Proprietary traders and quants, the so called smart money to add liquidity to the markets and of course make profits for themselves on the losses of others which is what trading is all about.
NOTE:
There's 2 types of false breaks, first being the above described based on deception which happens in a low volatility and the second are false breaks that happen in high volatility like in a very choppy market.The second I don't pay much mind to because I don't trade in choppy markets. The first, on the other hand is very important to watch for in low volatility at key support and resistance levels. being able to spot false breaks gives you the ability to utilise them and if caught in one and faked out of the trade, the understand of why gives you the ability to turn a disadvantage into an advantage.
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