trading fake outs
Here's something lots of traders gets stopped when trading breakouts. FAKE OUTS.
A fake out is when the price exits a range or consolidation in a strong sudden move, most retail traders believe it to be a breakout and add a position. Price then reverse and hit your stop loss.
This is an example of how you can take advantage of such situation.
When the price is consolidating near a SOLID level (longer time frames recommended, 1h and up) and exits the range to test, let's say, the resistance, you can add a short order to trade this fake out. S/L shall be above the resistance and T/P at the range level.
If, however, your candle closes above the resistance, you might want to consider a break out.
A fake out is when the price exits a range or consolidation in a strong sudden move, most retail traders believe it to be a breakout and add a position. Price then reverse and hit your stop loss.
This is an example of how you can take advantage of such situation.
When the price is consolidating near a SOLID level (longer time frames recommended, 1h and up) and exits the range to test, let's say, the resistance, you can add a short order to trade this fake out. S/L shall be above the resistance and T/P at the range level.
If, however, your candle closes above the resistance, you might want to consider a break out.
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