Stock Market Guide: Institutional Traders Dirty Tricks
Revealed for the first time... if you are losing money because of false breakouts in the stock market then you need to read this entire article.
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.
Institutional traders use dirty tactics in the stock market that are so bad, they should be illegal.
After reading this article, these dirty tricks might make you angry.
You may even want to forget you ever read this...
But I'll make you a promise - stick with it, hear me out...
And you will be happy you did.
Because you will learn an entirely new way of looking at the stock market and in particular false breakouts...
We need to look at what support and resistance lines are and they what false breakouts are.
Knowing WHY support and resistance lines work will help you protect yourself against false breakouts.
When investors buy or sell, they form an emotional attachment to the trade. It is emotions that keep a market going higher or sent it into a downtrend.
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.
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.
Regret Is A Reason Why Support and Resistance Lines Form
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.
When you study a chart, draw support lines and resistance lines at recent bottoms and tops. You should expect the trend to slow down at these levels. Use support and resistance lines to enter positions or to book profits.
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, attracting more bears just before a rally.
Any stock chart can form false breakouts but be especially careful of 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.
Institutional traders have access to all limit orders. They know how many more buy orders are above a 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.
False breakouts will knock you out of a trade. But don't do what most amateur traders do which is to take a single run at a stock and once stopped out, go bipolar and say the stock is bad and never return. Obviously there was something you fundamentally liked about the stock in the first place and that has not changed. Professional traders will take several runs at a stock until finally nailing down the trade they want. - 23221
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.
Institutional traders use dirty tactics in the stock market that are so bad, they should be illegal.
After reading this article, these dirty tricks might make you angry.
You may even want to forget you ever read this...
But I'll make you a promise - stick with it, hear me out...
And you will be happy you did.
Because you will learn an entirely new way of looking at the stock market and in particular false breakouts...
We need to look at what support and resistance lines are and they what false breakouts are.
Knowing WHY support and resistance lines work will help you protect yourself against false breakouts.
When investors buy or sell, they form an emotional attachment to the trade. It is emotions that keep a market going higher or sent it into a downtrend.
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.
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.
Regret Is A Reason Why Support and Resistance Lines Form
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.
When you study a chart, draw support lines and resistance lines at recent bottoms and tops. You should expect the trend to slow down at these levels. Use support and resistance lines to enter positions or to book profits.
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, attracting more bears just before a rally.
Any stock chart can form false breakouts but be especially careful of 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.
Institutional traders have access to all limit orders. They know how many more buy orders are above a 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.
False breakouts will knock you out of a trade. But don't do what most amateur traders do which is to take a single run at a stock and once stopped out, go bipolar and say the stock is bad and never return. Obviously there was something you fundamentally liked about the stock in the first place and that has not changed. Professional traders will take several runs at a stock until finally nailing down the trade they want. - 23221
About the Author:
By Steve Wyzeck. When are you finally going to get tired enough of losing money in the stock market to do something about it? To make money stock trading visit stock market
posted by X - Men @ 6:34 AM
0 Comments
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home