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12/7/2024 11:51:59 AM (GMT+1)

What is a "false breakout" and how to use it in trading?

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A false breakout is a situation in the market when the price temporarily exceeds a key support or resistance level but then returns to its previous range. This can signal to a trader that the market has mistakenly perceived the breakout as a continuation of the trend. False breakouts often occur due to manipulation by large players, creating the illusion of a strong move.

In trading, a false breakout can be used to open counter-trend positions. For example, if the price breaks through a level but then quickly returns, it can signal a buying or selling opportunity against the current trend. It is important to correctly identify such moments to minimize risks.


This material was prepared by Khachatur Davtyan, developed and translated by artificial intelligence.



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