How to Trade Fakeouts
Chart Patterns (Part 3)
When the pattern
experiences a false breakout, prices will usually rebound. Traders who have
sold the downside breakout or who have bought the upside breakout will have
their stops triggered when prices move against their positions. This usually is
caused by the institutional traders who want to scrape money from the hands of
individual traders.
"Success is getting what you want. Happiness is wanting
what you get."
By Dale Carnegie.
"Develop success from failures. Discouragement and
failure are two of the surest stepping stones to success."
By Dale Carnegie.
How to Trade Fakeouts
Chart Patterns (Part 2)
The head and shoulders pattern is
considered a reversal. If formed at the end of an uptrend, it could signal a
bearish reversal. Conversely, if it is formed the end of a downtrend, it could
signal a bullish reversal. Head and shoulders are known for generating false
breakouts and creating perfect
opportunities for fading breakouts.
False breakouts are common with
this pattern because many traders who have noticed this formation usually put
their stop loss very near the neckline.
"What hurts you today makes you stronger tomorrow."
By Unknown Author.
WHAT ARE FOREX SIGNALS?
Forex signals are buy and sell trade alerts, which are sent
to the paid subscriber’s e-mails or cell phones. Using such service is ideal
for new traders who are not confident in their own skills or for the busy, more
experienced Forex players who do not have the time to analyze and monitor the
market.
"If there’s hope for the future, there is literally
power in the present."
By Zig Ziglar.
How to Trade Fakeouts
Chart Patterns
Chart patterns are physical groupings of price you can
actually see with your own eyes. They are an important part of technical
analysis and also help you in your decision-making process.
Two common patterns where false breakouts tend to occur are:
-Head and Shoulders
-Double Top/Bottom
The head and shoulders chart pattern is actually one of the
hardest patterns for new traders to spot.
However, with time and experience,
this pattern can become an instrumental part of your trading arsenal.
"There’s something that is within you, there’s power
within you, that’s greater than the world."
By Michael Beckwith.
"Success is the sum of small efforts, repeated day in
and day out."
By Robert Collier.
How to Trade Fakeouts
Trend lines
The SPEED of price movement is also very important.(Part 2)
How do we fade trend line breaks?
It’s very simple actually. Just enter when price pops back
inside.
This will allow you to take the safe route and avoid jumping
the gun. You don’t want sell above or below a trend line only to find out later
that the breakout was real!
Using the first chart example, let’s point out possible
entry points by zooming in a little
"A goal properly set is halfway reached."
By Zig Ziglar.
How to Trade Fakeouts
Trend lines
The SPEED of price movement is also
very important.
If price is inching like a
caterpillar towards the trend line, a false breakout may be likely. However, a
fast price movement towards the trend line could prove to be a successful
breakout. With a high price movement speed, momentum can carry price past the
trend line and beyond. In this situation, it is better to step back from fading
the breakout.
"Perfection is not attainable, but if we chase
perfection we can catch excellence."
By Vince Lombardi.
WHAT CURRENCY PAIRS ARE TRADED?
EUR/USD (Frequent)
GBP/JPY (Swing Trades Only)
GBP/USD (Swing Trades Only)
USD/CHF (Swing Trades Only)
EUR/JPY (Swing Trades Only)
"Try to be a rainbow in someone’s cloud."
By Maya Angelou.
How to Trade Fakeouts
Trend lines
In fading breakouts, always remember that there should be
SPACE between the trend line and price.
If there is a gap between the trend line and price, it means
price is heading more in the direction of the trend and away from the trend
line. Like in the example below, having space between the trend line and price
allows price to retrace back towards the trend line, perhaps even breaking it,
and provide fading opportunities.
"Eveyone here has the sense that right now is one of
those moments when we are influencing the future."
By Steve Jobs.
How to Trade Fakeouts
In order to fade breakouts, you need to know where potential
fakeouts can occur.
Potential fakeouts are usually found at support and
resistance levels created through trend lines, chart patterns, or previous
daily highs or lows.
"Innovation distinguishes between a leader and a
follower."
By Steve Jobs.
