Karan Bhojwani explains false breakout or failed break, a stock market phenomenon--he further guides the reader-investors on steps to be taken during such market happenings.
Trading is one of the most rewarding professions in the world, but it can also be one of the most depressing and mentally difficult if you do not trade properly. To become a successful trader, one needs to have a trading strategy, discipline, proper money management techniques and self-control in the market. However, apart from the aforementioned traits, one more key trait which will help you to become a successful trader is to know when not to trade or which trades you should give a miss.
As the quote succinctly puts it: “Successful traders need to know when to be in a trade; They need to know when to not be in a trade”.
Indian market since the beginning of the calendar year 2017 has witnessed a decent run-up and delivered good returns in a short span of time. During this period, we often hear about the term ‘breakout’ from traders and during this merry period, traders would have fetched handsome profits. An astute trader waits for the breakouts to catch the trend and this strategy looks amazingly simple, isn’t it? The impulsive trader places his buy-stop order just above the crucial resistance level. If the breakout happens, the order gets filled and a long position is opened. However, there is opposite side of the coin also: one of the disappointing encounters is the false breakout. It frequently goes ahead on the heels of an immaculate value activity design that appears to have everything putting it all on the line. You set your buy-stop orders, the orders get filled, but before you know the price has fallen back inside the aforementioned pattern and now you are confronting a potential misfortune.
WHY DOES THIS HAPPEN? EVEN BETTER, HOW MIGHT YOU AVOID THE DANGER OF A FALSE BREAKOUT?
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