Michael 1.

Parsons

t/
�� DesPite having different angles, each of these

are flags and can be used to signal an entry

Corn

Trading false breakouts

In real life, trading a breakout is not always as simple as we would hope.
There are a host of reasons why a market may muster enough strength
to break through a wall and still falter and return to the prior side of that
wall. A failure is referred to as a false breakout, a term that is very
fitting. Synonyms for the word false include terms such as misleading,
deceptive, wrong, fabricated and deceitful. All ofthem apply well in
describing what a false breakout means for a trader. This is why there is
a need to look for confirmation on any breakout trade you are
considering. Unfortunately, false breakouts are a frequent occurrence and
are very effective in trapping traders on the wrong side of a trade.
So what do you do if you entered a trade only to discover that it was just
a false breakout? The first step is to get out ofyour trade as soon as
possible. As simple as this statement may seem to be, when dealing
with breakout trades this is an extremely important point to understand.
False breakouts have a nasty habit of moving in the opposite direction
and sometimes this turns out to be a considerable move. In other
words, if you bought on a breakout to the upside and it turned out to be a
false, then price may not only drop back within the pre-breakout zone
but continue to fall much lower. If you fai led to exit at the first sign of
trouble you could be looking at a substantial loss.

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