Fake breakouts in trading occur when the price moves beyond a key support or resistance level, giving the illusion of a strong trend forming, only to reverse direction shortly after. These false signals often trap traders who enter positions expecting momentum to continue, only to face sudden losses. Predicting fake breakouts is notoriously difficult because they often look identical to genuine breakouts at first. Market makers, low liquidity, and stop-hunting tactics can all contribute to these deceptive moves. Even experienced traders struggle with distinguishing real breakouts from fake ones, making risk management and confirmation signals essential in such scenarios.
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