A column published on Toyo Keizai ONLINE: Is defrauding warmly welcomed?

Good morning, this is Matsushita.

The Nikkei average rose on March 2 with a long-awaited

breakout above the consolidation,

but afterwards it did not form an uptrend,

and it returned to the trading range again.

In terms of chart patterns,

the recent breakout is currently a false breakout.

This thing called a “false breakout”

refers to a movement where

the price action does not form as patterns or technical theories expect,

ending in disappointment,

and once a pattern appears,

it creates expectations among market participants,

and many investors dislike false breakouts.

As evidence, keywords like “techniques that do not fail in false breakouts”

or “methods that eliminate false breakouts”

are very well received by investors.

However, I have consistently been a proponent of false breakouts.

In other words, I welcome false breakouts.

What is the reason?

As mentioned above, a false breakout

means that chart patterns and technical theories

do not reproduce as expected or as patterns dictate,

and end in failure.

For something to be called a “false breakout,”

there must be movements that are not false breakout, that are exact, or perfect,

i.e., movements that align with expectations and patterns.

There should be movements that fit precisely.

If false breakouts were the main price action,

then it would not be a false breakout at all, but the main thing.

A false breakout is, after all, not the main move, but a low-frequency failed price action.

Therefore there is no need to rule out false breakouts excessively,

and when a false breakout occurs, investors expect to be able to ride the next, the genuine price move,

and continue the same actions.

If so, you will catch some false breakout losses as well, but

you will also ride the genuine price movement, which should be in line with expectations and patterns,

and the gains from the genuine move will outweigh the losses from the false breakout.

Therefore, after I began to profit, I have not paid attention to false breakout movements.

Because such things are only one element of probability.

Let us not seek perfection in investing.

Since investors operate based on probabilities and allocate capital to future phenomena,

it remains inherently unstable.

It is impossible to move perfectly at all times.

If you seek an unnecessary degree of perfection there,

the very existence collapses,

and these investors cannot make a profit.

When it comes to false breakouts, invest with a relaxed attitude,

as if you could laugh and be deceived.