Trading Mastery 101 - Trading With Price Breakout Strategies

By Space Learn

Successful stock market trading is all about using technical indicators to help you determine when to profitably buy and when to sell a stock. In addition, learning the best indicators, how to confidently apply them, building your personal strategy, and understanding how to use various order types is the key to a comprehensive learning experienc

• Language: English
• Publisher: Space Learn
• Release date: Feb 15, 2024
• ISBN: 9798869195364

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Trading Mastery 101 - Trading With Price Breakout Strategies

Copyright © Space Learn, 2024

Cover design by Space Learn

Interior design by Space Learn, Georgia 30043, USA.

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means electronic, mechanical, photocopy, recording, or any other except for brief quotations, not to exceed 400 words, without the prior permission of the publisher.

First published in 2024 by

Space Learn

Table Of Contents

Copyright

Table Of Contents

About

You Will Discover In This Book

A Chart's Anatomy

How Does the Stock Market Operate?

Why Do Novices in the Stock Market Fail?

What Separates Technical and Fundamental Analysis

The Battle Between Bulls and Bears

A Common Illustration of a Breakout

The Operation of a Descending Channel?

Beginners' Guide to Four Habits of Channel Trading

Trading Channel Range Descending

Breakout Trading Descending Channel

Sideways Price Movement Following an AB Capital Chart Breakout

How to Spot Breakouts in Advance?

How to Determine Channel Breakout Price Targets

Advice for Channel Trading

The Most Underappreciated Trading Strategy

Before You Draw a Trend Line, Read This

How to Determine in 60 Seconds Whether a Breakout Is Real

Trading Execution Is Very Important

The Top 10 Questions and Answers About Breakout Trading

Before You Start Intraday Trading, Read

Five Minutes to Assess Market Sentiment Analysis?

An Open-minded Trader Can Always Tell by Looking at the Market Open

Why Trade Options

What is an Option

Jargon in Options Trading

Long vs. Short in Options Trading

Options Trading: ITM, ATM, and OTM

Greeks in Options

The Significance of Strike Price in Options Trading

Essential Ideas You Should Understand About the Stock Market

Technical vs. Fundamental Analysis

Trading Chart Types

Steer Clear Of These Stocks To Save Your Wealth

Diverse Trading Types

The Significance of Support and Resistance in Trading

Chart Patterns

Technical Indicators

How Profitable Traders Create a Trading System

Last Remarks

About

Successful stock market trading is all about using technical indicators to help you determine when to profitably buy and when to sell a stock. In addition, learning the best indicators, how to confidently apply them, building your personal strategy, and understanding how to use various order types is the key to a comprehensive learning experience and practical use of technical analysis for yourself.

This  complete Book will provide all the practical knowledge you need to become  confident and immediately start  trading stocks.

Learn at your own pace and apply what you learn to your own favorite stocks that you may already be following!

Perfect for those who are brand new to trading in the stock market or consider themselves beginners or intermediate traders. This Book covers many topics that you can practically apply and use immediately.

Thanks for your interest in the Book and get started. Many thanks and I look forward to seeing you in your first chapter!

You Will Discover In This Book

How to position oneself in advance of channel breakouts by anticipating them before they occur How to trade high probability patterns with channel breakouts How to determine the target for the channel breakout The descending channel pattern is a lucrative trading method. Price war psychology The trader's mentality How to trade like a professional rather than a common trader How Volume Should Be Interpreted The useful information behind RSI Insider advice regarding channels quotes from eminent investors and merchants How to trade breakouts with a higher margin of safety Cutting losses, cutting losses, and cutting losses are the three components of successful trading. 

You may stand a chance if you can adhere to these three guidelines. - Ed Seykota In this book, I just pay attention to one pattern: descending channel. And I only pay attention to one indication tool: Relative strength index, or RSI, is a momentum indicator that assesses whether prices are overbought or oversold. There are three sections to this book: The first part, How Stock Market Works?, is intended specifically for novices who might not be familiar with the basics of the stock market or the distinctions between technical and fundamental analysis. Beginners would learn what to do and what not to do in trading and investing in Part I. 'How a Descending Channel Works?', Part II, attempts to provide all the information that anyone should be aware of regarding descending channels, including where to look for them, how to trade the channel range, and how to trade channel breakouts. The real deal is in Part III, How to identify BREAKOUTS before they happen? where I divulge the insider information that stocks provide before a breakout. 

This section of the book may be the most beneficial since it maximizes your possibility for profit while lowering your margin of risk. You will learn how to trade a falling channel here, which will enable you to benefit even in the event that the breakout fails. Since they work another full-time job, most investors view trading as a hobby. But trading will pay you like a business if you approach it that way. Trading will compensate you like a hobby if you approach it that way, yet hobbies don't make money—they cost money. -Minervini Mark Every EOD chart is created using Spider Software, and every US market chart is provided by Investing.com. Best wishes! 

A Chart's Anatomy 

To provide beginners with a sense of what a chart looks like, I am creating the monthly channel of the Nifty 50 Index. Although descending channels can be seen on the RSI panel, this channel is climbing rather than descending. The green vertical lines in the middle panel provide information regarding volume, or the number of shares traded on a specific candle. You can see my favorite indicator, the RSI, in the bottom panel. 

The overbought level on the RSI panel is indicated by a dotted line at 70 levels, while the oversold level is indicated by this line not appearing at 30 levels. (Traders are known to say, Buy when the RSI is at 30 and sell when it is at 70. This isn't entirely accurate, as we'll discover later, but you must understand that RSI levels between 30 and 70 are significant. I have also drawn channels on the RSI panel, as you may have noticed. You'll get a sense of how much I adore channels! Keep in mind that channels can be drawn over a variety of time periods, which explains why our collection of charts is so diverse, ranging from one-minute charts to daily, weekly, monthly, and even quarterly charts. 

Informal tip: Institutional investors use weekly charts more frequently than retail investors do, although retail investors use daily charts more frequently (although they do occasionally pay attention to monthly charts as well, as they invest for a longer length of time). It makes sense that professionals and retail shareholders don't seem to be on the same page! As you can see, they base their conclusions on many charts. Thus, begin focusing on the charts that experts notice if you want to trade like a pro. Pay close attention to weekly charts in particular, as this is the timeframe that large investors prefer to use. 

How Does the Stock Market Operate? 

Channel Types Because of greed, fear, ignorance, and hope, people have essentially behaved and responded in the market in the same way throughout history. Because human nature never changes, Wall Street remains constant despite changes in the economy, stock market, and pocketbook. -Jesse Livermore Price ranges that a stock trades in during a specific period of time are known as channels. A price channel, also known as a trading channel, connects the support and resistance levels that a stock is currently trading inside using parallel trendlines. 

A channel's bottoms are referred to as supports, and its tops are referred to as resistances. In the stock market, there are primarily two kinds of channels: trend channels and envelope channels. Channels of Envelopes Moving channels that encircle changes in price are called envelope channels. Donchian Channels and Bollinger Bands are the most well-known examples. Moving average trendlines are incorporated into the Bollinger Band. High and low prices serve as the foundation for Donchian channels, with the average of high prices serving as resistance and the average of low prices serving as support. Although they are undoubtedly useful, we won't include envelope channels in this book since if we had, their popularity would not have increased. Merely 63% of the time, my most proficient trader generates profits. 

The majority of [SAC] traders only saw profits in the area of 50 to 55 percent. This implies that you will frequently be in error. In that scenario, you should aim to minimize your losses and increase the size of your winnings. -Steve Cohen Bollinger Bands in ABB; the price candles are encircled by the channel on the top panel. This channel shows that, as is often the case before a breakout, the Bollinger Band (BB) gave a pressure on price candles at the very end of the right side. Additionally, a green candle that breaks the top line of the BB indicates an upside breakout in the chart itself. As we can also observe, the RSI's average line has crossed, signaling BUY. Channel Donchian, Nifty 500 index You can see that the price was initially moving close to the resistance line in the Donchian channel above, suggesting that the trend was bullish. Subsequently, the trend turned negative as it continued to expand lower and the price began to move close to the support line. 

The price is finally seen to be advancing toward the middle line, which shows that bullish buying is occurring. Remember to listen to the volume; in this case, take note of the last six candles' volume. The volume of green candles is higher, confirming the bullishness. It is usually advisable to use volume to validate trends. Bollinger and Donchian channels are moving channels, as you may have noted, as opposed to trend channels, which are stationary. An envelope channel is progressive because it moves in tandem with the price. Because they only let a certain amount of price movement between them after they are drawn, trend channels are more inflexible. 

We will not be talking about channels in this book. We shall discuss channels in this section, with a focus on the descending channel. Channels of Trends There are essentially only three kinds of channels—up, down, and sideways—because stocks may only move in these three directions. Ascending Channel: A bullish trend and upward price movement are indicated by an ascending channel. The ideal channel for purchases is one that is climbing. Even though the price is on the support line, you will eventually be in the black because of the steep price climb in this area. And Higher Highs and Higher Lows are the reason for it. Horizontal or sideways channels are simpler to identify since they repeatedly contact the same high price and low price without deviating from the range. Although a sideways or horizontal channel may appear to be the simplest, they can be quite misleading because they resemble sleeping stocks. 

Numerous things can be indicated by a sideways channel. It may indicate that traders are unsure of the stock's future course. If the stock was previously in an uptrend, it could indicate that it is consolidating before starting a new uptrend. It could also indicate that the stock is being distributed before a reversal (after a prior rise) or accumulated following a prior slump. A falling channel denotes a bearish trend as it tracks the price's downward movement. This is the riskiest channel for buyers because it has a slow price decline. If you make the costly mistake of entering a steep channel, you will lose money regardless of whether the price is near a support or resistance line. It also occurs as a result of the stock's lower highs and lower lows. In other words, this book will help you become more adept at handling the riskiest channel pattern—which also happens to be the least rewarding—even though breakouts can be extremely beneficial in this situation. 

Learning to trade a declining channel can help you succeed in ascending channels since you will have a helping tailwind. In contrast, your learning curve would be quick and your fighting muscles would get stronger in a descending channel since you would be swimming against the flow or trend. 

Why Do Novices in the Stock Market Fail? 

Like becoming a doctor or an attorney, trading is not something you can accomplish overnight. It's a profession that requires experience, education, and time. -Mark Cook As a novice investor, investing appears simple when you first enter the stock market. And it ought to be. They tell you there's only one rule to success in the stock market. There's only one rule to follow, unless you're a natural short seller: buy low, sell high. 

Books claim that as long as you follow this one guideline, everything else will work itself out. In technical analysis, there is just one exception to the aforementioned rule: stop loss. (A stop loss is a preset sell level at which you limit your loss by selling a stock at a loss because you think it will continue to decline despite the stock not moving up in accordance with your trading signal.) Whoa! Simply said, buy low, sell high. Is there anything simpler than that? But it's not that easy, my dear. If this weren't the case, we wouldn't see as many individuals struggling—mutual fund managers included—the majority of them are unable to beat or outperform the index. Attract high and sell low. It's not that complicated. Understanding what is high and low is the issue. —Jim Rogers Consider this fictitious instance. 

You purchase stock XYZ with the expectation of making a lot of money; it was in the news when you purchased it, a number of market analysts were endorsing it, and it was given extremely high targets on business channels. You believed that the stock would soar in value. And you buy it with assurance! You reason, There can't be that many experts and people wrong! Common sense advice: Avoid following the herd. An overabundance of hype indicates that a stock is close to peaking and will likely decline. But Alas! The stock begins to tumble as soon as you purchase it. It makes a sideways turn; you are unaware that the stock has now moved into a horizontal channel and out of its ascending channel. You comfort yourself, knowing that it is only taking a breather before accelerating forward. 

Analysts who assert that it is merely a consolidation and that you should accumulate it to avoid missing out on a fantastic opportunity also support your viewpoint. Who would want to pass up a fantastic chance? You average it down and purchase further shares of the stock as a result of the exhilaration. What occurs next? The typical thing! The stock begins to decline (you may have seen that it has moved from its previous horizontal channel to a descending one). It appears as though Newton created the law of gravity especially to illustrate how your stock moves. It appears that the TV channel's indignation and optimistic predictions were all meant to lure you toward your demise. Even the renowned physicist Isaac Newton was unable to withstand the euphoric seduction. At the time, the South Sea Company was the hottest stock in England, and he had shares in it. 

He initially sold all of his stock for a 100% profit. However, he eventually gave in to the market's irrational euphoria and purchased those identical shares at a somewhat higher price, losing 20,000 pounds in the process. Newton is credited as saying, I could calculate the motions of the heavenly bodies, but not the madness of the people, at this same moment. You watch in anger every day as the stock seems to be speeding downhill instead of moving in the direction you would like it to. You abandon up in exasperation and sell the shares to book a loss. And Behold! The stock appears to have learned of your sale as soon as you make it, since it quickly reverses course. After that, it begins to rise, and you experience intense remorse and annoyance. (If you're not aware, the stock recently broke out of its declining channel—a pattern that you will learn how to trade in this book.) Should stock market specialists truly possess such expertise, they would be purchasing stocks instead of offering recommendations. Norman Augustine You tell yourself, I won't buy a stock ever; the stock market is like gambling. 

You quit the stock market as a result of this traumatic event, which leaves a deep psychological scar. Rather, you begin investing in mutual funds with the confidence that your money will be secure with the fund managers since they are professionals in this area. Here, ignorance is bliss since, as you may have imagined, 80% of mutual fund managers are incompetent against the index. 96% of actively managed mutual funds underperform the market (or their benchmarks) over any sustained period of time. -Antony Robbins You are not alone if it sounds familiar to you, so don't panic! Sitting in the same boat that you are now in, the majority of us have been there. 

While there are no absolutes in the stock market, channel trading is extremely close to having them. Why is it the case? Since channels are the most basic entities. 

If you search for them, you can locate them with ease since, if you look, they