Avoiding Traps in the Market | Whatsinfin Insights
In the fast-moving world of trading, breakouts often grab attention. But not every breakout is the real deal. Some are false breakouts — deceptive moves that trick traders into entering positions, only to quickly reverse and trigger losses.
So, how do you spot the fake from the real? Here’s a simple, smart guide:
🧠 What is a False Breakout?
A false breakout occurs when the price moves beyond a key level (like support or resistance) but then quickly reverses back. It gives the illusion of a new trend but actually traps traders before the price resumes its previous direction.
🔑 How to Identify a False Breakout
- Low Volume Confirmation
A real breakout usually comes with strong volume. If volume is weak, it’s likely a trap. - Quick Reversal Candles
Watch for pin bars, engulfing candles, or doji patterns right after the breakout. These often signal a fake move. - No Retest of Breakout Level
Real breakouts often retest the broken level (turning resistance into support or vice versa). If price doesn’t retest, be cautious. - Divergence on RSI or MACD
If the price is breaking out but your indicators show divergence (e.g., RSI isn’t confirming momentum), it’s suspicious. - Breakouts During Low-Volume Sessions
Many false breakouts happen during Asian sessions or before major news — when there’s low liquidity.
🧠 Pro Tip:
Before entering any breakout trade, wait for confirmation — either a successful retest or a strong candle close beyond the level with high volume.
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