The '5th rule' in support/resistance trades !!!There is a false and very deceptive saying in technical analysis when it comes to identifying strong and valid S/R levels, which says that the more tests apply to S/R levels the stronger they become.
excuse me WHAT?!!!!!
Many tests won't make support nor resistance levels any stronger, in fact, we have a rule here which mentions: ' the 5th touch of S/R level will most probably become a breakout '
most probably ladies and gentlemen, not 100%
the psychology behind this is simple:
every time we bounce from a support or resistance level, more retail traders will be attracted to open a position in the direction of the bounce, therefore a lot of liquidity will create for market makers, aka smart money, to join the party and grab their liquidity in their favor and move the market with ease afterward.
as lots of retail traders are not familiar with basic risk management methods, they put their stop losses just above or below the S/R levels, sooooo... liquidity will be provided. easy stop hunt opportunity !!!
this is in fact a common way for market makers to manipulate the market and deviate the price, trap as many traders as they can, and hunt every stop losses out there.
*one more key point: after the breakout, it's not 100% guaranteed that the S/R level is flipped. it could be a deviation!!
that it for today's article, please consider liking and following me if you find any of my ideas useful xoxo
