How To Avoid False Breakout

HOW TO AVOID FALSE
BREAKOUT
Course by AJAY R
CHANNEL NAME - THE TRADER
GREETINGS TO ALL.,
HOPE EVERYONE IS SAFE AND SOUND…….
Its been 2 months with you guys, and I’m really overwhelmed with the support
and love you guys are giving me.
I envy those.
But I would like to clear one thing. when you ask for any questions or support
from me please be gentle or polite, as there where many people who was very
harsh to me, as I was not replying them due to my busy schedule.
You guys need to understand that, this trading group is not my full time and
it’s really hard for me to maintain both work life as well as channel but I’m
trying to manage both, to the maximum extent. During this busy schedule, I
may not find time to reply you all at once or immediately but I don’t miss
anyone intentionally.
I’m just a fellow who likes to help and give support on trading, for you guys but
these kinds of things really demotivate me from helping.
Hope you understand. Sorry if anyone’s feeling is hurt. Sorry again…..
Okay., lets begin the course for today….

There where many asking me how to avoid false breakouts both in query
channel as well as personal messages.
As I have promised you guys, that I will help you…
Here I am.
So, let’s begin…...
First and foremost, you guys should understand, what is breakout? And why
does that happen? If you want to avoid false breakouts.
Definition of breakout in stock market goes like this….
A Breakout is a price movement of a stock or commodity beyond a

identified level of resistance or support, which is usually followed by
heavy volumes and increased amount of volatility.
Now lets breakdown this definition.
Price movement – what is price movement and how to identify it?

That’s where candle sticks come in, you have to know how to read a candle in
order to say, what the price movement depicts.
If you don’t know how to read them. You can check the previously shared
“basics of candle’s stick “PDF which I shared before.
Identified level of resistance or support - what is identified level of

resistance or support?
To identify the level of resistance and support is where we take advantage of
trendline concepts. The watchlist I share daily on the channel is nothing but
identified support and level.
If you don’t know how to identify them. Please do check my previous PDF on
“How to pick watchlist for tomorrow”.
Heavy volumes – what are volumes ?
Volume is the number of units traded during a given time period.
Its obvious that when the demand rises the stock price rises. Volume is the one
of major indicator used by price action traders to find the demand.
This is where the game begins on how to avoid false breakout. Chartists always
employ a Two-dimensional approach for analysis which includes the price and
Volume.
However, volume provides an important secondary confirmation after
breakout whether to go long or not.
When volume is used with price action it tells us about the strength and
weakness of the price movement.
As, a rule heavier volume (spike given at the bottom of the chart) should be
present in the direction of the prevailing price trend.
To stay long on the entry taken you should always witness a good spike above
average line following the trend, and lesser volume when the price movement
decreases.
When there is a pattern formed you can witness one thing that the volume will
get diminish as price pattern form. The subsequent breakout after a dead
volume is where breakout happens and that’s where we take advantage over
it.
Increased amount of volatility – As I said earlier this strategy works well

on trending markets rather than range bound markets. So, when you trade in
range bound market strictly follow the rules.
Rules to avoid false Breakout: - (These conditions must be met in
the following sequence)
1. If there is No volume on breakout. Reject the trade at first.

2. You should see good momentum candle on breakout.
3. Suspect a false breakout always when there is movement from support
of the trendline to resistance of the trendline. Because, the movement is
already bullish for a long period and the breakout couldn’t be that
powerful. (as like indigo chart shared below)
4. Use SQZMOM/MACD as a buffer. (Buffer means as an additional
indication to avoid false breakout. Do not consider this as an ultimate
thing. Both indicators are just a support for your trade).
As I always believe that without an example, nothing can be understood better

I’m sharing the charts on the watchlist of this week abiding above rules.
False breakout avoided scenario.
Failed Trade scenario.
NOTE:
• There is no perfect entries.
• Breakout may fail.
• Retest may never come.
• Confirmation may be too late.
The only thing we can do is, avoiding this to the maximum possibility.
By using the above method, you can have only a probability of avoiding it to
the maximum extent but not completely.
Thank you…...!!
Keep supporting as always!!
Much love to you all!!!

MY CHANNEL INFO…………….
Click this to join my channel.
The_trader20
Click this to join my Quora space ( you can get a full view of my trading in this space)
The_trader20

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HOW TO AVOID FALSE

Okay., lets begin the course for today….

Definition of breakout in stock market goes like this….

A Breakout is a price movement of a stock or commodity beyond a

Now lets breakdown this definition.

Price movement – what is price movement and how to identify it?

Identified level of resistance or support - what is identified level of

Increased amount of volatility – As I said earlier this strategy works well

1. If there is No volume on breakout. Reject the trade at first.

As I always believe that without an example, nothing can be understood better

Keep supporting as always!!

Much love to you all!!!

Click this to join my channel.

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