Breakout Or Fakeout? by Ken Calhoun
Trading “false breakouts” can be a costly mistake. Find out how you can minimize these types of entries using simple visual price action, volume, and volatility-scanning strategies.
It's the single biggest challenge a trader will face: you enter what looks to be a solid technical breakout trade, only to see it reverse course and stop you out. When this happens over and over, these false breakouts can quickly drain your trading account.
Two of the most common errors that active traders make include:
• Not using tight stops, which results in taking stop-losses that are too expensive, and
• Overtrading choppy charts with weak, uncertain technical entry signals. If you trade choppy, low-volatility charts, you’ll likely have many stops and fewer winning trades.
Instead, knowing what specific types of charts to trade can put the odds in your favor, since strong breakouts often continue in-trend, when traded correctly. In this article, I’ll show you how to minimize false breakout entries using simple, visual strategies that are based on price action, volume, and volatility scanning...