FOREX THEORY
Fade the Breakout (Part 2)
If a support level is broken, that means that the general
price movement is downwards and people are more likely to sell than buy.
Conversely, if a resistance level is broken, then the crowd
believes that price is more likely to rally even higher and will tend to buy
rather than sell.
Independent retail forex traders have greedy mentalities.
They believe in trading in the direction of the breakout. They believe in huge
gains on huge moves. Catch the big fish, forget the small fries.
In a perfect world, this would be true. But the world is not
perfect. Frogs and princesses do not live happily ever after. What does in fact
happen is that most breakouts FAIL.
Breakouts fail simply because the smart minority has to make
money off the majority. Don’t feel so bad. The smart minority tends to be
comprised of the big players with huge accounts and buy/sell orders.
In order to sell something, there must be a buyer. However,
if everyone wants to buy above a resistance level or sell below a support
level, the market maker has to take the other side of the equation. And let us
warn you: the market maker ain’t no fool.
 If a support level is broken, that means that the general price mo...){kind=link}
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