Kardec Trader explains why traders enter breakouts too early and lose money. Wait for a retest: price should return to the old resistance level, now acting as support, before you enter. This confirms the breakout is real.
When you first start trading, the main things you learn is that you have resistance and you have support. So in between resistance and support, what you have is just price action. When a stock's like this, what does the resistance mean? It means that there's sellers that are overpowering buyers up in this area. But then when every single time it comes down into support, what does that mean? It means buyers are overpowering sellers. If I asked you what happens if the stock breaks above, what are you doing in the scenario? Retest. Now, why would you look for a retest? This is because when you have this move right here, this doesn't actually validate anything because this move could actually come right back down and fail. So I would get rid of this. And what I'm looking for is just the extended move back into the resistance which is now turned into support. Now, that resistance that we previously had, vice versa, if the stock theoretically came back down, this support is now turned into resistance for that downside.
