EicherMotors Bear trap
Updated
Educational Idea:
Most of the Novice conventional traders use support and resistance levels. If the support breaks, they tend to short-sell the scrip & try to profit out of it. And, if the resistance breaks, they go long. But the majority of the time, they become a victim.
Let me get this straight.
Let's take an example, in this case, Eicher Motors. When Eicher Motors is close to the support pivot, let's say, everyone(Traders and Investors) will take a long position. Since everyone is buying the stock, there will be a lack of sellers & the price will shoot up suddenly in search of the sellers, and the investors will have no choice but to buy for a higher price since there is a huge demand.
But the thing is, the investors are much smarter than that. When everyone is long at the pivot (or Support Point), they will just short the stock, using all the buy orders provided by the traders and drive the price down, breaking the pivot (Support). This will create a panic for the traders as the support is broken. In a panic, they will square off their position for a loss, and to cover their loss (creating sell orders), they will just short the stock. (Again Creating new sell orders, at a lower price)
Now, the investors got what they wanted, i.e, fresh sell orders at a lower cost. They will just unload their short positions to the traders who are taking fresh short positions and will start accumulating the quantities they want for their portfolio at a much better & lower cost.
And then, the stock price goes up, giving investors their returns and traders, well, their losses.
Please Note, This is just an Educational Idea. Trading involves risking capital. Always protect your capital by keeping a strict stop-loss.
Happy Trading & Investing.
Most of the Novice conventional traders use support and resistance levels. If the support breaks, they tend to short-sell the scrip & try to profit out of it. And, if the resistance breaks, they go long. But the majority of the time, they become a victim.
Let me get this straight.
Let's take an example, in this case, Eicher Motors. When Eicher Motors is close to the support pivot, let's say, everyone(Traders and Investors) will take a long position. Since everyone is buying the stock, there will be a lack of sellers & the price will shoot up suddenly in search of the sellers, and the investors will have no choice but to buy for a higher price since there is a huge demand.
But the thing is, the investors are much smarter than that. When everyone is long at the pivot (or Support Point), they will just short the stock, using all the buy orders provided by the traders and drive the price down, breaking the pivot (Support). This will create a panic for the traders as the support is broken. In a panic, they will square off their position for a loss, and to cover their loss (creating sell orders), they will just short the stock. (Again Creating new sell orders, at a lower price)
Now, the investors got what they wanted, i.e, fresh sell orders at a lower cost. They will just unload their short positions to the traders who are taking fresh short positions and will start accumulating the quantities they want for their portfolio at a much better & lower cost.
And then, the stock price goes up, giving investors their returns and traders, well, their losses.
Please Note, This is just an Educational Idea. Trading involves risking capital. Always protect your capital by keeping a strict stop-loss.
Happy Trading & Investing.
Trade active
Note
Stop-loss Update: Bring Stop to 2300 below the recent Pivot low.Note
Stop-loss Update: Bring Stop to 2400 below the Quarterly Bolinger Band Mean.
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