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
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3. You can also check my book on Breakout Trading
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Please read all the instructions carefully before using it
https://t.co/3teN7JLDMs
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