I apologize in advance that I ramble and have bad examples, but I do want people to watch it to understand the psychology of how traders trade, and what they can do to prevent losing money in the markets. I explain the mistakes that new traders make by focusing too much on the shorter time frames, and provide my theory on why false breakouts occur. If you think like an institutional, you can see the other side of the coin from retail trading.
There is no such thing as a false breakout. If you look at the data, and there is a lot of it, probably close to 95% of moves that appear to be breakouts "fail" as you call it because that is actually "normal" behavior. It's an actual breakout that is the outlier. A more appropriate descriptor would be, how to spot a false "failure". It does not require you to think like an "institution" but rather understand what a normal distribution looks like.
Yes definitely being able to spot distribution/accumulation is vital to understanding breakouts. I didn't include that in the video and in hindsight, I definitely should have. As far as failure/false breakouts, that's just semantics. I call them false breakouts and I know a lot of professional traders, and hedge fund traders that call it that, and I've been using that terminology. Still, semantics aside, I want people to focus on the concept.
I'm not arguing semantics I'm saying spotting them is pointless since the assumption should ALWAYS be that it's a false breakout. That is why there a multi-billion dollar industry that uses this statistical understanding to trade otherwise known as mean reversion or HFT trading. It's the whole economic theory behind providing liquidity and making markets. There is nothing to avoid. It's analogous to saying when you get your mail today be careful of meteor strikes, it could happen to you!
Yes, it is just semantics but that's not the issue. Yet, be careful, there's many different types of "breakouts" and the price action you've discussed in the video only represent a few while other price actions in your video had successful breakout price actions that were not discussed. Also, when you say "think like an institution"...its something retail traders can not do because institutions have access to resources that the typical retail trader does not have access to. Yet, it makes sense to have the desire to think like an institution trader or whatever. In addition, institutions tend to put more emphasis on the market context, risk management (compliant department), collaboration (network) with others in their industry and many other things that we as retail traders do not have access to. Simply, they have deep pockets and do not need to put as much emphasis on "timing" in comparison to the typical retail trader that's trying to time their entries to reduce the chance of a stop being hit. Seriously, an institutional trader that has a Long position in Crude Oil CL futures @ 36.00 isn't going to sweat as much if it drops to 35.00 in comparison to a retail trader with a Long position @ 36.00 that then sees the position drop to 35.00 Just as important, there are many different types of institutional traders. We as retail traders do not have access to any information about the type of institutional traders that are currently moving the markets involving our positions. In contrast, institutional traders from one firm actually communicate with other institutional traders at another firm...traders that can impact the markets...legally or illegally (if caught). This is also something we as retail traders can not do. The only way you'll be able to explain how an institutional trading firms operates or make their trade decision is to explain such from within the industry along with giving specific details behind the decision making process of a particular trade. Simply, all trade decisions at an institutional trading firm isn't decided upon by one individual. Its decided by a team of individuals and then manage by the trader with specific instructions. Retail traders are more individual...lone wolf types. There's another issue involving firms using algorithms not just for short term trading but also for long term trading. Once again, the typical retail trader are not using algorithms although there is a slow growth of retail traders moving into algorithm trading. Seriously, at this moment you as a retail trader can take a position during a time duration heavy with algorithm trading. Then an hour from now different institutions get involved based solely on global economic events that showed its face and then a few days from now there may be institutions getting involved solely because of hedging, market tendencies, adjusting positions because of risk analysis, helping each other and so on... All while the typical retail trader is trying to hold on to the position via chart analysis. Therefore, maybe the solution is not to try to think like an institution considering we don't have access to the resources that institutions have access and they are not dependent upon chart analysis like we are as retail traders although some institutions do in fact use chart analysis as "part" of their decision making process. We as retail traders are very dependent upon our own ability to enforce our own trading plan...most can not do it even after many years of trying. In contrast, institutions have departments to ensure their traders do what has been instructed to do.
you are on the right track in your thinking but just scratching the surface. support and resistance drawn on charts is just showing your hand to market makers. Yes most breakouts fail that is the result of larger players building inventory. Trading is a complex game and the beauty is the majority of the players think they know how to play. The reality is very different.
Yes, I was just doing the video on a whim, so my thoughts were not all that organized and the examples I was using was just a random chart of gold. I did ignore some examples of different kinds of breakout trades, and kinda categorized them into one lump of "this is how to avoid", but you have to understand, I don't want to make a 30 minute video talking about every kind of breakout setup and which ones fail and which ones succeed etc etc especially it being 3AM EST and I don't normally get a lot of sleep. I did try to put some caveats while I was talking to try to prevent confusion. I should probably do a little more prep work next time. Thanks for the feedback endicottsteel and wrbtrader!
I understand where you're trying to go with this. I was once there too trying to "think like an institution". Luckily for me I had access to close friends and family that worked in the industry and a few still do (e.g. floor trader, institutional trader and so on) to help guide me. Simply, I know the game is really being played outside of the charts but I can use charts to give me a piece of the puzzle but only for that moment in time. Simply, what I see now most likely will have a different context tomorrow.
Yes. An evolving trader usually figures out the hard way how to maneuver within hidden areas of support and resistance. Nowadays, the window of opportunity can dissapear within the blink of an eye. You snooze, you lose