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.