Price action and chart patterns
False breakout (fakeout)
Price pokes beyond a range or level, triggers breakout traders and stops, then closes back inside and reverses.
Why it works
Fakeouts are where liquidity is collected. Trapped breakout traders become fuel for the move in the opposite direction.
How to use it
When a breakout candle closes back inside the range, look for the opposite trade with the stop beyond the fakeout wick.
The typical mistake
Buying every breakout without waiting for a close: you become the liquidity.
FAQ
What is Fakeout in trading?
Price pokes beyond a range or level, triggers breakout traders and stops, then closes back inside and reverses.
How do you trade Fakeout?
When a breakout candle closes back inside the range, look for the opposite trade with the stop beyond the fakeout wick.