Step by Step Family to Identify False Breakouts in Trading
6. 🎭 Look for trap patterns (bull/bear trap)
False breakouts create traps to catch traders:
Bull trap: breaks resistance and falls sharply.
Bear trap: breaks support and rises strongly.
7. 🕵️♂️ Analyze the wick of the candle
Candles with long wicks and small bodies near support/resistance usually indicate rejection.
If there are many wicks above a resistance, buyers are being absorbed.
8. 📉 Use indicators as confirmation
RSI: If there is divergence, the breakout could be false.
OBV (On Balance Volume): It should accompany the price movement.
MACD: Look for crosses or divergences at the moment of the breakout.
9. 🧠 Evaluate market psychology
False breakouts often exploit traders' impatience or euphoria.
Ask yourself: Does the market want to take out stops before moving in the opposite direction?
10. 🧪 Perform backtesting
Review previous examples in that same asset.
Does that market have a history of false breakouts? Some pairs are more manipulable than others.
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