False Breakout Identification - Free Trading Tutorials From Elliott Wave International Saved Me From Losing A Fortune

Every now and then, there is a false breakout in the chart pattern, even though it's staring at you that it's definitely a breakout.

The worst thing is, it breakouts and then goes straight TO the opposite direction and I almost got caught out.

Have a look at the following S& P 500 chart. Although it's 5 minutes chart but the principal applies to all time frames.

false breakout pattern

Looking at the middle section, it was bouncing from the support line but it did not go below it and began to go up in a zig-zag pattern. The low and high points were getting higher. It was screaming at me to buy at that time. I placed a buy stop order just above the upper line shortly before point E happened.

As a free member of Elliott Wave International Club, I received free video trading tutorial and trading articles. Whilst waiting for the trade to automatically trigger, I did a quick revision on zig-zag and elliott wave inside a channel. You can click here to join Elliott Wave International Club free as well.

161.8 % ( remember the golden fibonacci ratio ) of AB was approaching and this channel/ consolidation could be elliot wave 4 of wave C. I canceled my buy stop order straight away. Boy, was I glad to cancel the order. It dropped more than 42 points or 420 points using spread betting companies in 3 hours after E hitting 161.8 % of AB.

This false breakout could have cost me thousands of pounds. It's funny how being a free member of Elliott Wave International Club saved me from this fake breakout. I could have ridden this trade all the way down as this could be a very good way of trading false breakout move, and this is how smart investors know how to trade false breakout, but I was too busy celebrating " making the right decision to cancel the up bet ".

After I calmed down and also re-read a book called

Advanced Swing Trading: Strategies to Predict, Identify, and Trade Future Market Swings (Wiley Trading)

available from amazon in UK via above link and amazon.com in US via the link below

Advanced Swing Trading: Strategies to Predict, Identify, and Trade Future Market Swings (Wiley Trading)

From chapter 2 and chapter 8, the chart above confirmed S &P 500 reached the end of the down trend and reversal pattern formed. I placed an upbet after the sharp reversal. I added more after it went back up inside the channel as elliot wave 3 was clearly staring at me.

Although it went past the previous false breakout, there was no way of telling at that time and it took almost 6 hours unless I use a day trading software which expired now after the free trial.

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EWI zig zag traidng course

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