1. Smart Money &
2. Dumb Money
‘Smart Money’ refers to big sharks who have money & information power who give direction & momentum.
‘Dumb Money’ refers to retail traders who often try to make quick money.
(2/N)
Breakout Trading is the most underrated trading technique in the trading community!
Every trader (intraday, swing, positional, or scalper) should know how to differentiate between a genuine breakout and a false breakout.
Do you know why?
Read this thread!
(1/N)
1. Smart Money &
2. Dumb Money
‘Smart Money’ refers to big sharks who have money & information power who give direction & momentum.
‘Dumb Money’ refers to retail traders who often try to make quick money.
(2/N)
Participation from smart money creates a "genuine breakout."
And the absence of smart money participation results in a "false breakout."
Hence, it is always a good idea to follow smart money (by knowing real or false breakout)
(3/N)
As per Investopedia
“A breakout is a stock price moving outside a defined support or resistance level with increased volume. A breakout trader enters a long position after the stock price breaks above resistance.”
(4/N)
Similarly, few recognize it as a breakdown if the price breaks the support trend line.
To keep it simple, we will focus only on the breakout.
(5/N)
As per Investopedia -
“A failed break occurs when a price moves through an identified level of support or resistance but does not have enough momentum to maintain its direction.”
(6/N)
Look at some examples:
Example 1 - HDFC
(7/N)
We need 4 parameters:
1) A Big Breakout Candle
2) Quick Time (the price shouldn’t move in small candles after breakout)
3) Absence of Selling
4) Good Volume
(9/N)
The breakout candle should be big as compared to the previous candle before the breakout.
It indicates the presence of "smart money"
(10/N)
A breakout should come in one quick candle (previous step).
It indicates the absence of "smart money"
A breakout with a couple of small candles is not good (as shown below)
(11/N)
Breakout candle should have no selling wick or the selling wick should be less than 20% of the breakout candle.
It indicates smart money is keen to carry the position!
(12/N)
These charts displayed these four characteristics at the time of breakout, and hence, the price showed a good move on the upside later.
There is a high probability of a good upside move if a chart displays all these characteristics during the breakout
(14/N)
As a trader, before entering any trade, you should know the bare minimum below 4 aspects:
- Entry
- Stop-Loss
- Profit Booking Level
- Risk per Trade
(15/N)
If you enjoyed this thread:
1. Follow me
@indraziths
for more threads on the stock market trading
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3. You can also check my book on Breakout Trading
https://t.co/XnMi7MuAGD
Please read all the instructions carefully before using it
https://t.co/3teN7JLDMs
More from Indrazith Shantharaj
4 factors to measure the performance of a trading system:
1 - Accuracy
There is no such thing as 90% Accuracy without compromising on other factors (like profit factor, etc)
Fact - A good trading system will have only 35-60% accuracy without compromising other factors.
(1/n)
2 - Profit Factor (PF)
It is similar to risk-reward. It is derived using the below formula:
Profit Factor = Total Profit by winning trades / Total loss by losing trades
Fact - A trading system above 1.2 PF is good if it scores well with other factors.
(2/n)
3 - Maximum Drawdown
The maximum drawdown also plays a vital role psychologically while picking a trading system.
Fact - Maximum Drawdown in any trading system should not exceed 20%. I suggest picking only the techniques which have less than 10% maximum drawdown.
(3/n)
4 - Maximum Consecutive Losers
We all feel bad even if we lose only Rs.1,000 in a trade. Because it is not only about the money, it is emotionally difficult to accept the failure.
Fact - A good trading system will have less than 15 consecutive losing trades.
(4/n)
TRADE LIKE CRAZY
10 Profitable Intraday Trading Systems, which are backtested against 10-years of Banknifty Historical Data!
(n/n)
https://t.co/BuUie17Ish
1 - Accuracy
There is no such thing as 90% Accuracy without compromising on other factors (like profit factor, etc)
Fact - A good trading system will have only 35-60% accuracy without compromising other factors.
(1/n)
2 - Profit Factor (PF)
It is similar to risk-reward. It is derived using the below formula:
Profit Factor = Total Profit by winning trades / Total loss by losing trades
Fact - A trading system above 1.2 PF is good if it scores well with other factors.
(2/n)
3 - Maximum Drawdown
The maximum drawdown also plays a vital role psychologically while picking a trading system.
Fact - Maximum Drawdown in any trading system should not exceed 20%. I suggest picking only the techniques which have less than 10% maximum drawdown.
(3/n)
4 - Maximum Consecutive Losers
We all feel bad even if we lose only Rs.1,000 in a trade. Because it is not only about the money, it is emotionally difficult to accept the failure.
Fact - A good trading system will have less than 15 consecutive losing trades.
(4/n)
TRADE LIKE CRAZY
10 Profitable Intraday Trading Systems, which are backtested against 10-years of Banknifty Historical Data!
(n/n)
https://t.co/BuUie17Ish
"VOLUME is the ultimate Trading cheat code" PART 2
Please read the FIRST Thread Before Reading this!
https://t.co/IV1HrDlzqk
#StockMarket #stock #volumeintrading
#1 Volume Color Can Create a False Illusion
At first look, it looks like a big volume spike.
But if you notice the price candle, it has a big selling wick.
It indicates "SELLING PRESSURE" is high at that time.
We can easily avoid this false impression using the "BLACK" color code across all the volume bars.
Now your mind doesn't assume it is a bullish volume spike!
(If you don't want to use the black color, then view the chart without getting any bias based on the volume color)
#2 Analyze Each Volume Spike Carefully
In this image, the price is breaking the resistance trendline.
How do you say whether it is a genuine breakout or false breakout (from a volume perspective)?
Observe the major Volume Spikes.
A is Bullish (Price moved upside on the next day)
B is Bearish (Price fell on the next day)
C is Bearish (Price moved sideways and fell)
D is Bearish (Price fell on the next day)
So High Probability of FALSE BREAKOUT!
Please read the FIRST Thread Before Reading this!
https://t.co/IV1HrDlzqk
#StockMarket #stock #volumeintrading
VOLUME is the ultimate Trading cheat code.
— Indrazith Shantharaj (@indraziths) August 6, 2022
But, most people never use it in the right way \u2013 because no one ever taught them how.
Here are 10 psychological triggers to knowing Volume in a better way :
#1 Volume Color Can Create a False Illusion
At first look, it looks like a big volume spike.
But if you notice the price candle, it has a big selling wick.
It indicates "SELLING PRESSURE" is high at that time.
We can easily avoid this false impression using the "BLACK" color code across all the volume bars.
Now your mind doesn't assume it is a bullish volume spike!
(If you don't want to use the black color, then view the chart without getting any bias based on the volume color)
#2 Analyze Each Volume Spike Carefully
In this image, the price is breaking the resistance trendline.
How do you say whether it is a genuine breakout or false breakout (from a volume perspective)?
Observe the major Volume Spikes.
A is Bullish (Price moved upside on the next day)
B is Bearish (Price fell on the next day)
C is Bearish (Price moved sideways and fell)
D is Bearish (Price fell on the next day)
So High Probability of FALSE BREAKOUT!
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Tying Marvel’s stable of pulp-fiction heroes to a real place — New York — served a counterbalance to the sometimes gravity-challenged action and the improbability of the stories. That was just what Stan Lee wanted. https://t.co/rDosqzpP8i
The New York universe hooked readers. And the artists drew what they were familiar with, which made the Marvel universe authentic-looking, down to the water towers atop many of the buildings. https://t.co/rDosqzpP8i
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