(Last Updated On: December 11, 2019)

Okay, now let me address the part on the failed breakout. So we address the part on the failed breakout, it means that the breakout happened and the breakout didn’t work out, not because it’s fake, but because the market structure suddenly changed around or the market participants decide not to pursue this bullish stance anymore. It could be due to news, it could be due to some other reasons, which you won’t know until it’s on a hindsight. But generally the breakup fail.

So one way of a preventive measure or a lower probability of getting into fake, or a failed breakout, is that look at the trading volume for that breakup there, like what I showed in the previous example itself. If you see a trading volume spike very significantly during the breakup itself, and this stock is a highly liquid stock is a start with high average trader value. And there is a volume spike on that breakout there.

Then that suggests that the chances of a failed breakout is going to be much lower compared to if you see a certain breakout and the trading volume is very low or very average, there isn’t a spike in trading volume. Okay, so this is one of the simplest way to increase your probability or chances or avoiding getting into a failed breakout.

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Philip Teo

Founder & CEO at Traderwave Pte Ltd
Philip Teo is an entrepreneur, speaker and trading coach who specialises in the field of Technical Analysis of the financial markets. He is currently the Founder and CEO of Traderwave Pte Ltd, a financial technology company that offers a web charting application to global traders. He has conducted many trading seminars and appeared on national television before. He is also currently an official speaker and trainer with SGX Academy. Learn more about him at his Google+ Profile, LinkedIn Profile and Facebook Profile

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