The Truth About Breakout Signals: How to Filter Out False Breakouts

'Breakout' signals are important patterns that occur when the price of a specific asset breaks through a previous resistance level and rises. However, this signal is not always reliable. At GoldenCircle, when evaluating breakout signals, we consider trading volume and volatility together to assess their reliability. For example, if a price surge occurs on a recent trading day without any increase in trading volume, it indicates a high likelihood of a false breakout. Therefore, investors can make more accurate judgments using these indicators.

The Importance of Trading Volume and Volatility

Trading volume reflects market participation and plays a crucial role in evaluating the reliability of price changes. When a breakout signal occurs, a surge in trading volume suggests that the price change is a true market reaction. For instance, if the price of a specific asset rises by 10% while trading volume increases by 50%, this can be interpreted as a reliable breakout signal. Conversely, if the price suddenly rises by 15% but trading volume decreases, this may potentially be a false signal. GoldenCircle carefully analyzes these changes in trading volume to provide investors with better grounds for their judgments.

GoldenCircle's Principle of Transparency in Judgment Criteria

One of GoldenCircle's biggest differentiators is that we do not hide our judgment criteria. We transparently disclose the process and evaluation criteria each time a trade occurs. For example, when a breakout signal is generated, we detail any changes in trading volume and how the corresponding volatility (SQZ) has acted. This transparency helps investors trust their own judgments.

The Decision-Maker in Investment is Myself

Investing should always be based on individual judgment. GoldenCircle provides various information necessary for making investment decisions, but the final judgment must be made by the investor themselves. Participate in the GC Investor Challenge to experience this judgment process firsthand. On October 1, you can start in just 5 minutes.