Why Support and Resistance fail sometimes, Why Stoploss hits?

Have you ever watched a stock break through a strong support or resistance level and wondered why it failed? And in next moment, it triggers your stoploss.

price breaking down the strong support
Breakdown of Support

If you're a trader or interested in the technical analysis of stocks, you've probably heard of Support and Resistance. These are basic yet powerful concepts that play a crucial role in planning trades. They help you identify zones where demand and supply are likely to emerge for a particular asset.

What Are Support and Resistance? (For Beginners)

If you're new to trading, here's a quick and simple explanation of these two key terms:

Support

Support is the price zone where a stock stops falling and either takes a pause or bounces back upward. On a chart, prices move in two directions—up and down. During a downtrend, there often comes a point where the fall slows or halts. This area is known as the Support zone.

a strong support zone
Support zone


Resistance

Resistance is the exact opposite of Support. It's the price level where the stock stops rising and often reverses direction. Think of it as a ceiling that the price struggles to break through.

strong resistance zone
Resistance zone


Why Do Support and Resistance Fail Sometimes?

You might wonder—if support or resistance is clearly visible on the chart, why does the price sometimes break through it? Like in the following examples:

failed support


failed resistance

The answer lies in two common phenomena: False Breakouts and Stop Loss Hunting.

Stop Loss Hunting: The Institutional Strategy

When you trade, you probably set your Stop Loss and Target levels just like millions of other traders. Yet many still lose money. Why?

Because markets are psychological battlegrounds—not just about lines and levels.

Institutions and large corporations control a huge chunk of the market. The same trade you enter with ₹10,000, they might enter with ₹10 crore. They don’t want to lose. Their trades are powered by advanced technology, professional strategists, and deep pockets.

So, while you might place your stop loss at a certain level you think is safe, these institutions may target those exact areas—just below your support or above your resistance.


False Breakouts: Trapping the Retail Traders

Institutions often cause false breakouts to shake out retail traders. Here's why:

  • Retailers are often impatient and enter trades without full confirmation.

  • When a breakout appears to happen, they jump in, and their stop losses get triggered.

  • The market then reverses—leaving the smart money to take over the trade calmly.

This is no accident—it’s a trap.

false breakout of resistance


As Warren Buffett famously said:

"The market is a device for transferring money from the impatient to the patient."

So, What Should You Do?

1. Wait for Confirmation

Always cross-check the price action before entering a trade. False breakouts often show up as strong single candles—don’t get tricked.

  • Wait for the next candle to form.

  • Look at higher timeframes for stronger confirmation.

  • Check other factors like volume, liquidity, and sentiment.

Remember: Markets are unpredictable.

2. Manage Your Risk-to-Reward Ratio

You can't stay in the game if you lose all your capital on one trade. Here’s how to manage risk effectively:

  • Never put all your money into one trade.

  • Maintain a minimum 1:2 Risk-to-Reward ratio.

  • Use leverage cautiously—5x is more than enough for most traders.

3. Consider Swing Trading Over Intraday

Intraday trading is often mistaken as a quick money-maker. It isn’t—for everyone.

Swing trading (holding positions for days or weeks) offers:

  • Less manipulation

  • More time to analyze

  • Broader market perspective

  • Less stress—you don’t need to sit in front of the screen all day

Whether you make 1% ten times or 10% once, the result is the same—but with different effort and risk profiles.

Conclusion

Markets are psychological battlegrounds, not just charts and patterns. Sometimes you win, sometimes you learn. The stock market can grow your wealth, but it’s not a money-printing machine—unless you have excellent knowledge and strong experience.

✅ Always learn before you trade
✅ Be consistent in learning
✅ Start small, then scale
✅ Protecting capital is more important than chasing profits

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