moonchild
VIP Contributor
In the recent article we talked about price breakout, and we said it happens when a price break out of a zone and make a new high or low, Fake out on the other hand is the opposite of breakout, price actually breaks out of the zone but then within a short period of time it will come back to the former support and then continue trending, completely ignoring the breakout.
That's why I always advise on waiting for a retest, if a breakout is genuine, after breakout and retest it will continue trending, but when it is otherwise, after retest it will just sink in and continue moving resulting in a long wick.
To spot a fakeout you have to pay attention to candlesticks, that's how you understand whether the bulls or bears are in control of the market.
Draw zones on your chart and notice any long wick that penetrated the zone, you'll notice that it makes a comeback, retest and then go back into the channel, there isn't much to trade in a fake out because it is basically like trading support and resistance, except In this case with a fake out, always wait for a retest when there is a breakout.
That's why I always advise on waiting for a retest, if a breakout is genuine, after breakout and retest it will continue trending, but when it is otherwise, after retest it will just sink in and continue moving resulting in a long wick.
To spot a fakeout you have to pay attention to candlesticks, that's how you understand whether the bulls or bears are in control of the market.
Draw zones on your chart and notice any long wick that penetrated the zone, you'll notice that it makes a comeback, retest and then go back into the channel, there isn't much to trade in a fake out because it is basically like trading support and resistance, except In this case with a fake out, always wait for a retest when there is a breakout.