Amateur traders like to gamble with great risks—they prefer to buy during upward breaks and short sell during downward breaks (if they have shorted). When amateur traders see a breakout, they immediately expect to get rich in a new major trend.
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Professional investors, on the other hand, are different. They like to trade against the direction of divergence, waiting for the market to return to normal. Professional investors know that breakouts are often a consuming movement that usually ends in a halt. That’s also why they prefer to exit during breakouts—trading in the opposite direction of the breakout. When an upward breakout stalls, they begin to short sell; or when a downward breakout starts to return to a range, they begin to buy.
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When a new trend breaks through a channel successfully, it can bring considerable returns, but in the long run, it is still more advantageous to trade with professionals. Most breakouts end in failure, accompanied by reversals, which is why channel lines are a good tool for trading against the breakout direction, with profit targets within the value range.
