How to follow false breakouts?
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  1. #1
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    How to follow false breakouts?

    First you might you want to ask what is a false breakout?.

    This is scenerio at the market resistance or support level where price breaks and closes above resistance or breaks and closes below support.

    At this point lots of traders will say it's an opportunity to enter a buy trade above past resistance or enter a sell trade below support.

    Then after entry, the market goes back into the resistance trade level or goes back into the support trading.. Then we say false breakouts have occurred.



    This image above shows an an example of what am saying.

    Safety measures : learn to set stop loss below broken resistance and above broken support

    Trade plan: you can look out for false breakouts and make a reversal entry once you a certain it was a false breakout

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  2. #2
    Trader Sixteen's Avatar
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    Sincerely so many traders are loosing easily with false breakout and this have been a very huge problem for impatient traders who are in a hurry to trade breakout. Sometimes it's good to be patient to properly have a confirmation about a breakout before trading them but even at that the market might give confirmation like the screenshot you placed and still turns out to be a false breakout. That is why stop loss remains important in our trade because for those who don't use stop loss and follow a false breakout, it's a sure means of easily loosing up your investment.

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  3. #3
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    Quote Originally Posted by Sixteen View Post
    Sincerely so many traders are loosing easily with false breakout and this have been a very huge problem for impatient traders who are in a hurry to trade breakout. Sometimes it's good to be patient to properly have a confirmation about a breakout before trading them but even at that the market might give confirmation like the screenshot you placed and still turns out to be a false breakout. That is why stop loss remains important in our trade because for those who don't use stop loss and follow a false breakout, it's a sure means of easily loosing up your investment.
    If safety measures are not taken, there is high chances of losing in forex through this false breakouts. This is why I stated that stop loss is necessary in our trade because it is what will help us minimize loss instead of holding a wrong position that will end up giving us more loss. I also think it's easier handling reversal than breakout because in cases of false breakout you need to be discipline to exit the market once you have fall for it or find yourself experiencing big losses.

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  4. #4
    Trader Toyen's Avatar
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    Forex traders can not be following a false breakout, the false breakout is bad and it will be the opposite of the real way we want to trade our forex account. False breakout is always happening around the support and resistance levels, it can not be traded otherwise than for the trader to keep their patience when they discover the false breakout is happening as they trade.

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  5. #5
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    I have seen and heard so many traders losing money through false breakouts, following a false breakout is no doubt a destruction and would lead you towards more loss than you would think of, support and resistance levels mostly see it happening and patience would save people than the strategies in that case!

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  6. #6
    Trader famousfx's Avatar
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    In fact traders must be able to be logical in trading situation like this by setting a tight stop loss in any trade, and we must not be greedy to be looking for many pips immediately after a breakout but we firstly seek for few pips and we may later use trailing stop to make more pips peradventure the trend would continue , so as to be on a safer side.

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  7. #7
    Trader cutiekc's Avatar
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    I only take the breakout trade when I am in the market already, but taking a trades because a breakout had occurred, I don't do that, you can see, if you had taken the trade after the breakout with the pin bar. With the stoploss placed below the wick of the pin bar , I don't think the movement will give 1:1 risk and reward before it reversed.

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  8. #8
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    This is a good information that you have shared with us here, it is true that there are times that the market can gives us false breakout movements which we can get deceive and make the wrong decision in the market that can gives us loss, in not recent times we newbie traders have really suffered from trading false breakout movements, so it will be good for us to recognize false breakout movements in the market.

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  9. #9
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    Quote Originally Posted by coolless View Post
    This is a good information that you have shared with us here, it is true that there are times that the market can gives us false breakout movements which we can get deceive and make the wrong decision in the market that can gives us loss, in not recent times we newbie traders have really suffered from trading false breakout movements, so it will be good for us to recognize false breakout movements in the market.
    Most newbies lacks experience so I wouldn't be very surprised seeing them get tricked with false breakout. Most times these false breakout could come with a confirmed setup and give you confidence you are making a good entry only to find yourself loose so much in forex. Following safety measures by applying better stop loss can be good and will give us all the needed chance to maintain a good trade protection if our analysis never goes as planned.

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  10. #10
    Trader Sixteen's Avatar
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    Quote Originally Posted by Ulthred View Post
    Most newbies lacks experience so I wouldn't be very surprised seeing them get tricked with false breakout. Most times these false breakout could come with a confirmed setup and give you confidence you are making a good entry only to find yourself loose so much in forex. Following safety measures by applying better stop loss can be good and will give us all the needed chance to maintain a good trade protection if our analysis never goes as planned.
    Some traders don't just like trading breakout because they always think that the chances of winning with breakout is low compared to reversal pattern. They are trying to avoid following false breakout so they don't get trapped in loss. One of the worst thing a trader would do is to still hold position of a false breakout, I bet you it's a clear way to easily face series of unplanned loss. I agree that risk management will be helpful and our stop loss will help us exit when it's a wrong signal.

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