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.
This little known secret has saved me thousands of dollars and now I'm going to share it with you.
You are about to learn a low down dirty trick that institutional traders use against you.
After reading this article, these dirty tricks might make you angry.
You may be so amazed and sickened that you simple refuse to believe what you are about to read in this article...
But you need to know what they are doing...
And you will be very thankful you did in the long run.
Because you will learn an entirely new way of looking at the stock market and in particular false breakouts...
First I will talk about what support and resistance lines REALLY are, and then I'll talk about false breakouts.
Learning the how and why resistance lines and support lines form will help protect you against false breakouts.
When most traders buy and sell, they make an emotional commitment to their trade. Their emotions can keep a market trend going, 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.
A chart is really nothing more than the result of emotions coming from the crowd of people in that particular stock.
The Main Reason Support And Resistance Lines Form Is From Pain
If someone trading a stock is still holding that stock when the price finally comes back to their cost basis, they are likely going to sell. It is painful to be in this stock and the trader simply wants to get out. This pain relief will temporarily stop a rally. These painful memories are why support and resistance lines form.
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.
Regret Is A Reason Why Support and Resistance Lines Form
Traders whose stock screener has alerted them to a stock that has spiked up will feel regret because they missed the move. If the stock retraces, they will quickly buy the stock for a chance at a second move up. This regret then excitement causes buying which 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.
Institutional Traders Cause False Breakouts
A false breakout or false upside breakout is when the price breaks through resistance which causes buyers to come in, and then suddenly reverses and falls back down below the resistance breakout level.
A false downside breakout happens when a stock falls below support. The bears jump in and short the stock. Suddenly the stock reverses and heads back up retaking the broken support level.
All stocks are fair game but especially any stock that has a high percentage of institutional ownership.
Institutional traders cause these false breakouts to make a ton of money off amateur traders.
Institutional traders have access to all limit orders. They know how many more buy orders are above a resistance level.
What institutional traders will do next is what is known in secret, behind closed door circles, as "running the stops". A false breakout occurs when the institutions organize a hunting expedition to run stops.
I will use an example so you can better understand what "running the stops" is. Let us say that a stock is below its resistance level at $10, the buy limit orders come flowing in near $8.50. Institutional traders can see these buy limit orders. They figure a calculation called the liquidity ratio which reveals how much a given stock will go up if all buy limit orders are executed at $8.50. They figure out that the stock will run to $11 if all the buy limit orders at $8.50 are executed. They then short the stock at $10 to force it down to $8.50 (they can do this because they have most of the money and can manipulate a market with their buying or selling power). At $8.50 they cover their short position and go long as the wave of buy orders are automatically executed pushing the stock up to $11. 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 $10. That's when your chart shows a false upside breakout.
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. - 23200
This little known secret has saved me thousands of dollars and now I'm going to share it with you.
You are about to learn a low down dirty trick that institutional traders use against you.
After reading this article, these dirty tricks might make you angry.
You may be so amazed and sickened that you simple refuse to believe what you are about to read in this article...
But you need to know what they are doing...
And you will be very thankful you did in the long run.
Because you will learn an entirely new way of looking at the stock market and in particular false breakouts...
First I will talk about what support and resistance lines REALLY are, and then I'll talk about false breakouts.
Learning the how and why resistance lines and support lines form will help protect you against false breakouts.
When most traders buy and sell, they make an emotional commitment to their trade. Their emotions can keep a market trend going, 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.
A chart is really nothing more than the result of emotions coming from the crowd of people in that particular stock.
The Main Reason Support And Resistance Lines Form Is From Pain
If someone trading a stock is still holding that stock when the price finally comes back to their cost basis, they are likely going to sell. It is painful to be in this stock and the trader simply wants to get out. This pain relief will temporarily stop a rally. These painful memories are why support and resistance lines form.
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.
Regret Is A Reason Why Support and Resistance Lines Form
Traders whose stock screener has alerted them to a stock that has spiked up will feel regret because they missed the move. If the stock retraces, they will quickly buy the stock for a chance at a second move up. This regret then excitement causes buying which 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.
Institutional Traders Cause False Breakouts
A false breakout or false upside breakout is when the price breaks through resistance which causes buyers to come in, and then suddenly reverses and falls back down below the resistance breakout level.
A false downside breakout happens when a stock falls below support. The bears jump in and short the stock. Suddenly the stock reverses and heads back up retaking the broken support level.
All stocks are fair game but especially any stock that has a high percentage of institutional ownership.
Institutional traders cause these false breakouts to make a ton of money off amateur traders.
Institutional traders have access to all limit orders. They know how many more buy orders are above a resistance level.
What institutional traders will do next is what is known in secret, behind closed door circles, as "running the stops". A false breakout occurs when the institutions organize a hunting expedition to run stops.
I will use an example so you can better understand what "running the stops" is. Let us say that a stock is below its resistance level at $10, the buy limit orders come flowing in near $8.50. Institutional traders can see these buy limit orders. They figure a calculation called the liquidity ratio which reveals how much a given stock will go up if all buy limit orders are executed at $8.50. They figure out that the stock will run to $11 if all the buy limit orders at $8.50 are executed. They then short the stock at $10 to force it down to $8.50 (they can do this because they have most of the money and can manipulate a market with their buying or selling power). At $8.50 they cover their short position and go long as the wave of buy orders are automatically executed pushing the stock up to $11. 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 $10. That's when your chart shows a false upside breakout.
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. - 23200
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Written by Steve Wyzeck. To improve your trading in one evening visit stock market
posted by X - Men @ 7:12 AM
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