Role reversal, breakouts and false breakouts
How broken resistance can become support, what a real breakout looks like, and how false breakouts trap traders who act too early.
Levels do not last forever. When the price finally pushes through one, two things can happen: a real breakout, or a false breakout that quickly snaps back. Learning the difference, and accepting that you will often get it wrong, is a big part of trading with levels.
When resistance breaks, it often turns into support. When support breaks, it often turns into resistance. This is called role reversal, or a "flip." The crowd memory explains it. Traders who sold at the old resistance may now regret it and want to buy back near that same price. Traders who missed the breakout may wait for the price to come back to the level before buying.
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