Day 7/20 – Breakouts vs Fakeouts
One concept I focused on today is the difference between breakouts and fakeouts.
A breakout happens when price moves above resistance or below support with strong momentum. Traders often watch these moments because they can signal the start of a new move in the market.
For example, when Bitcoin breaks above a strong resistance level, it may show that buyers are gaining control.
However, not every breakout continues moving in the same direction.
Sometimes price briefly breaks a level and then quickly returns inside the range. This is called a fakeout. It often traps traders who enter too early without confirmation.
That’s why many traders wait for additional signals such as: • A strong candle close above resistance
• A retest of the level
• Increased trading volume
Understanding the difference between real breakouts and fakeouts can help traders make more informed decisions instead of reacting too quickly.