False Breakout Patterns
A breakout that failed to proceed past a level, leading to a "false" breakout of that level, is referred to as a "false breakout." One of the most essential price action trading patterns to learn is the false double bottom and double top patterns, as a false-break is frequently a very strong indicator that price may be changing direction or that a trend may soon resume. False breakouts occur in all market scenarios, including trending, consolidating, and counter-trending.
Trading Tips To Respect:
✅ False breakouts can happen in markets that are trending, range-bound, or going against the trend. Watch for them in all market conditions since they frequently provide insightful hints about the direction the market will take.
✅ Trading against a trend can be challenging, but one of the "best" approaches is to watch for a clear false breakout signal from a significant support or resistance level, as in the last example above.
✅ False breakouts provide us with a "window" into the "fight" between expert and amateur traders, allowing us to engage in trading alongside them. Trading will appear to you in a different light if you can learn to recognize and trade false breakout patterns.
