2 Sucker Trades to Avoid
The risk in entering a trade after the market has made a large move, is that traders who have made money from the move will start taking profit, and an inexperienced trader can be left holding the bag, notes Johnathon Fox on DailyForex.com.
A lot of traders understand that price action trading is the art of looking at raw chart of a forex pair, stock, or instrument and using only the raw price data to decipher order flow from which they can spot high probability patterns that repeat themselves time again in the markets.
By learning these patterns and order flow clues, traders can position themselves in the correct way to profit from the next move in price.
Whilst many people cover the best setups and patterns to look for, what can at times be even more helpful is knowing what patterns to avoid or when the order flow signals given through the price action are sucking the trader in! A common term to explain traders being sucked into trading is “the false break.” Whilst trading the false break can be a super high probability trade for the price action trader that is doing the sucking in, the trader being sucked in can be in for pain.
In this article we are going to look at two really common sucker trades that traders need to avoid. These apply to not only price action trading, but many other types of technical analysis trading.
The False Break
The false break is a pattern that can be very profitable for the trader who is patient, but for the trader who jumps the gun or doesn’t wait for confirmation, it can be a sucker trade.