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How To Trade False Breaks In Trading

Discussion in 'Candlestick Patterns' started by Sandra S., Oct 24, 2015.

  1. Sandra S.

    Sandra S. Forum Member

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    False Breaks

    If price does not move in the expected direction, the pattern has failed. However traders can reverse their trade and still make a profit.

    False Breaks produce fast moves

    A false breakout occurs when price moves up past a previous pivot high and suddenly reverses for a fast move in the opposite direction. A false break can also appear when the market breaks out of the top or bottom of a triangle or other common pattern and reverse through the bottom or top of the pattern unexpectedly.

    A false breakdown occurs when price moves down past a previous pivot low and suddenly reverses up for a fast move.

    False breaks occur when the market breaches a chart pattern then suddenly reverses for the main move. Sometimes this is done by traders "setting up" the market, and typically the false break stops and turns on a Fibonacci point or a on a Support or Resistance Line.

    This occurs reasonable often and can also be the setup for the major move. Sometimes this a test of a previous point of significance like a trendline, low or high or Fibonacci line etc.

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