Stock Market Survival Tips: Avoiding Institutional Traders
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.
It may even make you want to close this page and forget you saw it...
But I'll make you a promise - stick with it, hear me out...
And you will be happy 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.
Learning the how and why resistance lines and support lines form will help protect you 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.
A chart is really nothing more than the result of emotions coming from the crowd of people in that particular stock.
Pain Is the #1 Reason Why Support and Resistance Lines Form
If someone trading a stock is still holding that stock when the price finally comes back to their cost basis, they are likely going to sell. It is painful to be in this stock and the trader simply wants to get out. This pain relief will temporarily stop a rally. These painful memories are why support and resistance lines form.
Let us say that a $20 stock drops down to $18 and stays there for a few weeks. The longer the $18 level holds, the more that traders believe that this is a good support level and buy the stock. Now right after buying, the stock falls to $15. Skilled traders will sell quickly and exit their position at $17 or at $16. Amateur traders will stay in their losing position until, one day, it rises back to their original entry level at $18. They will then sell this stock never to return. They eagerly jump out at the chance to "get out even". Their selling will temporarily stop a rally and form a resistance level.
Support and Resistance Lines Are Caused By 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.
Whenever you work with a chart, draw support and resistance lines across recent tops and bottoms. Expect a trend to slow down in those areas, and use them to enter positions or take profits.
Warning: False Breakouts Are Caused By Institutional Traders
When the market rises about resistance and pulls in new buyers and then suddenly reverses and falls back below that resistance, this is called a false breakout.
A false downside breakout happens when a stock falls below support. The bears jump in and short the stock. Suddenly the stock reverses and heads back up retaking the broken support level.
Any stock chart can form false breakouts but be especially careful of any stock that has a high percentage of institutional ownership.
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 have a secret practice they call "running the stops". A false breakout happens when institutions engage in hunting expeditions 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 get stopped out on a false breakout, dont be shy about getting back into a trade. Beginners tend to make a single stab at a position and stay out if they are stopped out. Professionals, on the other hand, will attempt several entries before nailing down the trade they want. - 23229
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.
It may even make you want to close this page and forget you saw it...
But I'll make you a promise - stick with it, hear me out...
And you will be happy 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.
Learning the how and why resistance lines and support lines form will help protect you 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.
A chart is really nothing more than the result of emotions coming from the crowd of people in that particular stock.
Pain Is the #1 Reason Why Support and Resistance Lines Form
If someone trading a stock is still holding that stock when the price finally comes back to their cost basis, they are likely going to sell. It is painful to be in this stock and the trader simply wants to get out. This pain relief will temporarily stop a rally. These painful memories are why support and resistance lines form.
Let us say that a $20 stock drops down to $18 and stays there for a few weeks. The longer the $18 level holds, the more that traders believe that this is a good support level and buy the stock. Now right after buying, the stock falls to $15. Skilled traders will sell quickly and exit their position at $17 or at $16. Amateur traders will stay in their losing position until, one day, it rises back to their original entry level at $18. They will then sell this stock never to return. They eagerly jump out at the chance to "get out even". Their selling will temporarily stop a rally and form a resistance level.
Support and Resistance Lines Are Caused By 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.
Whenever you work with a chart, draw support and resistance lines across recent tops and bottoms. Expect a trend to slow down in those areas, and use them to enter positions or take profits.
Warning: False Breakouts Are Caused By Institutional Traders
When the market rises about resistance and pulls in new buyers and then suddenly reverses and falls back below that resistance, this is called a false breakout.
A false downside breakout happens when a stock falls below support. The bears jump in and short the stock. Suddenly the stock reverses and heads back up retaking the broken support level.
Any stock chart can form false breakouts but be especially careful of any stock that has a high percentage of institutional ownership.
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 have a secret practice they call "running the stops". A false breakout happens when institutions engage in hunting expeditions 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 get stopped out on a false breakout, dont be shy about getting back into a trade. Beginners tend to make a single stab at a position and stay out if they are stopped out. Professionals, on the other hand, will attempt several entries before nailing down the trade they want. - 23229
posted by X - Men @ 12:16 AM
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