Imagine, the price makes a strong bullish move into resistance—and breaks out higher.
At this point, many traders have this thought process…
“The market is so bullish”
“Look at how big those green candles are!”
“It’s time to buy!”
So, this group of traders buy as the price breaks above resistance and their stop loss is likely below the previous candle low, below support, etc.
This means if the market makes a sudden reversal, you can agree that these cluster of stop loss will be triggered which puts selling pressure in the market.
Plus, if bearish traders step into the market and sell near the highs of resistance, you can expect the market to collapse lower and erode the gains it made earlier—that’s the power of the false break price action pattern.
At this point, many traders have this thought process…
“The market is so bullish”
“Look at how big those green candles are!”
“It’s time to buy!”
So, this group of traders buy as the price breaks above resistance and their stop loss is likely below the previous candle low, below support, etc.
This means if the market makes a sudden reversal, you can agree that these cluster of stop loss will be triggered which puts selling pressure in the market.
Plus, if bearish traders step into the market and sell near the highs of resistance, you can expect the market to collapse lower and erode the gains it made earlier—that’s the power of the false break price action pattern.
