Stock Market Survival Tips: Avoiding 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.
You are about to discover the unfair trading tactics that institutional and professional traders use against you in the stock market.
After reading this article, these dirty tricks might make you angry.
You may even want to forget you ever read this...
But you need to know what they are doing...
And I promise you you'll be glad you did.
Because you will learn an entirely new way of looking at the stock market and in particular false breakouts...
We must define support and resistance and then look at in more depth what false breakouts really are.
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.
What you see on a chart is the emotional commitment, or lack thereof, coming from the crowd that is trading that stock.
Pain Is the #1 Reason 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 who discover a stock that has spiked up feel like they have "missed the gravy train". When the stock falls back to a certain level, the traders who felt regret at missing the first spike up are eager to jump in for a chance at a second spike up or upward 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.
False Breakouts Are Caused By Institutional Traders
A false upside breakout occurs when the market rises above resistance and sucks in buyers before reversing and falling.
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.
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 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. - 23204
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.
You are about to discover the unfair trading tactics that institutional and professional traders use against you in the stock market.
After reading this article, these dirty tricks might make you angry.
You may even want to forget you ever read this...
But you need to know what they are doing...
And I promise you you'll be glad you did.
Because you will learn an entirely new way of looking at the stock market and in particular false breakouts...
We must define support and resistance and then look at in more depth what false breakouts really are.
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.
What you see on a chart is the emotional commitment, or lack thereof, coming from the crowd that is trading that stock.
Pain Is the #1 Reason 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 who discover a stock that has spiked up feel like they have "missed the gravy train". When the stock falls back to a certain level, the traders who felt regret at missing the first spike up are eager to jump in for a chance at a second spike up or upward 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.
False Breakouts Are Caused By Institutional Traders
A false upside breakout occurs when the market rises above resistance and sucks in buyers before reversing and falling.
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.
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 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. - 23204
posted by X - Men @ 7:15 AM
0 Comments
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home