In this article, We learn about “False Breakout “.Let’s Go!
A False Breakout is a type of false breakout that occurs when price moves out of a chart pattern but then moves back inside the chart pattern.
False breakout is also called “False breakout” or “Failed breakout“.
When price finally “breaks out” of a chart pattern (basically a support or resistance level), one would expect price to continue moving in the same direction as the breakout.
If a support level is broken, it means that the overall price trend is downwards and traders are more likely to sell than buy.
Conversely, if a resistance level is broken, then people think the price is more likely to rise higher and tend to buy rather than sell.
In fact most breakthroughs fail.
Potential false breakouts often occur at support and resistance levels created through trend lines, chart patterns, or previous daily highs or lows.
False trading can result in significant losses, which is why Stop Loss should always be used to control risk.
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