Reversal Breakouts and False Breakouts.

Forex Smart Trade Results, Tuesday, December 6, 2023 – $3,858

Forex Smart Trade Results, Monday, December 4, 2023 – $8,387
December 11, 2023
Forex Smart Trade Results, Wednesday, December 6, 2023 – $879
December 11, 2023

Forex Smart Trade Results, Tuesday, December 6, 2023 – $3,858


Reversal Breakouts.

Reversal breakouts start off the same way as continuation breakouts because, after a long trend, there tends to be a pause or consolidation.

Downtrend Then Consolidation Before Breakout

The only difference is that after this consolidation, forex traders decide that the trend is exhausted and push the price in the opposite or “reverse” direction.

As a result, you have what is called a “reversal breakout”.

You catch on quickly!

Reversal Breakout

False Breakouts

Now we know by now you are super excited to start trading breakouts, but you also have to be careful.

Just like Lionel Messi can fake out defenders, the market can also fake you out and produce false breakouts.

False breakouts occur when the price breaks past a certain level (support, resistance, triangle, trend line, etc.) but don’t continue to accelerate in that direction.

Instead, what you might’ve seen was a short spike followed by the price moving back into its trading range.

False Breakout

A good way to enter a breakout is to wait until the price retraces back to the original breakout level.

And then wait to see if it bounces back to create a new high or low (depending on which direction you are trading).

How to Trade a Breakout Safely

Another way to combat fakeouts is by not taking the first breakout you see.

By waiting to see if the price will continue to move in your intended direction.

If you do this you give yourself a better chance of making a profitable trade.

The downside to this is that you may miss out on some trades in which the price moves quickly without any hesitation.


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