False breakthrough, you must have been deceived

False breakthrough is a kind of price deception by institutions to lure many and short to wash the market. Although it is a trap, it also exposes the real intention of the main force, which is the opposite trend after the breakthrough.

In naked K trading, it is best for the false breakthrough to occur at the key point of strong resistance and strong support of the price. The false breakthrough trading strategy must first determine a key resistance or support level, and then observe the price operation in the future market to test the key level again. When a breakthrough occurs and then falls back to the key level, there are relatively strong false breakthrough K-line reversal signals, such as: Pinbar, engulfing line, evening star, dawn star, etc.

False breakthrough trading strategy is a counter-trend trading strategy that detects the top and buys the bottom, so once such a false breakthrough signal appears at a high level or position in a market, it may be an opportunity to capture a big top or a big bottom, and the profit margin is very large .

1. Form of false breakthrough:

A false breakout is a very strong signal, it looks like the price is about to break out, but it reverses quickly and is a "seduction" breakout, oftentimes, a novice trader misjudges it as a breakout, when in fact the price is just a false breakout It didn't stand above the previous high point or below the previous low point for a long time. As a novice trader, you have to learn how to use false breakthroughs to help your trading, instead of becoming their victim.

Two obvious examples here are false breakouts above and below key levels, namely a hammer with a long upper shadow and a hammer with a long lower shadow. (lure long, pull up and sell) and (lure short bottom reversal)

2. How to trade false breakouts

False breakthrough signals will appear in all trending markets, and the direction of the transaction is consistent with the current main trend direction. In the chart below, there are multiple false breakout signals in an obvious downtrend. Novice traders like to go long against the trend, but professional traders use this false breakout signal to continue shorting, standing in a more favorable position Location.

3. What to do if the market fluctuates

In the chart example below, we can see that a key resistance level was tested twice, and then on the third test, an inverted hammer broke through the long upper shadow, signaling a potential downside move.

As can be seen in the chart, a false breakthrough not only means a decline, but also triggers the entire downward trend market, and the false breakthrough triggers the first to lure more than the short to reverse the market.

For the range-bound market, it is mainly to wait and see or range trading. False breakouts can sometimes indicate the beginning of a new trend, and the end of a current trend.

1. The false breakthrough occurs in the trend market, which provides us with a strong clue.

2. Trading against trends is difficult, and one of the "best" ways to trade trends is to wait for an obvious false breakout signal from a key horizontal support and resistance level (as in the last example above).

3. Any breakthrough may be a false breakthrough or a real breakthrough. You should not be obsessed with breakthroughs when doing transactions. You must set losses if you have an order, and you must not relax risk prevention.

4. Generally speaking, those who make real breakthroughs and false breakthroughs are trend investors, so first make a stop loss point, and then buy in with real money. If you make money, it is a false breakthrough, and if you lose money, it is a real breakthrough.

5. The money you lost is the cost of confirming the authenticity of this breakthrough. If you can find a technical or financial analysis method to identify the true and false breakthrough, it is inaccurate. There is no such deterministic method, only to come out Only then do you know that it is a true or false breakthrough. If you want to participate, you can only use money to try it.