Breakouts and Fakeouts in Price Action – How to Trade Real Moves, Not Market Traps

Jasper Osita - Market Analyst

2025-07-15 08:52:39

Goal of This Lesson:

To teach you how to distinguish between real breakout opportunities and fakeouts designed to trap retail traders, using clean price action and structure, not indicators or guesswork.

Recap: Where We Are in the Price Action Series

Part 1 - Introduction to Price Action – Trading Naked Charts - gave you the roadmap for reading raw price behavior.
Part 2 - Mastering Price Action at Key Levels – How to Spot, Trade, and Win at the Most Crucial Zones - showed how to identify key levels, the battle zones of buyers and sellers.

Now in Part 3, we shift focus to what happens when price reaches those levels:

Does it break through with intention… or fake the move to trap the crowd and reverse?

Real-Life Analogy

Think of a breakout like a funded account evaluation.

A fakeout is when a trader hits a big win early, gets excited, but doesn't follow the rules—soon, the gains disappear, and the account resets.
A real breakout is when a trader builds a consistent edge, waits for the right setup, follows risk parameters, and finally passes with momentum and confidence.

Discipline and confirmation separate the trap from the trend.
Don’t get lured by the flashy move—wait for real structure and proof, just like you'd wait for a solid Phase 2 pass, not a one-day lucky spike.

What Is a Breakout?

A breakout occurs when price pushes through a key level (support, resistance, range boundary) with strong intent and follow-through.

But not every break is real.

In fact, the market is designed to trigger breakout traders and then reverse—this is the fakeout, also called a stop hunt or liquidity trap.

Understanding this is essential for anyone trading key levels.

The Price Action Anatomy of a Real Breakout

For a breakout to be valid, it should have:

1. Structure Before the Break

Price creating an unmitigated support and resistance levels
Tight range or compression before expansion
Liquidity pool above/below the level (i.e., trapped orders)

2. Candle Behavior

Candle closes outside the level, not just wicks
Wide body with little or no wick on the breakout side
Next 2-3 candles continues the move or cleanly retests the level

3. Price Context & Timing

Aligned with a higher timeframe direction
Happens during high-volume sessions (e.g., London, New York open)
May occur after a stop run or sweep of a previous high/low

Common Traits of Fakeouts

Signal	What It Means
Break candle wicks above the level but closes inside	Liquidity grab
Single spike with no buildup	No structural support
Creating a reversal pattern	Signs of no follow-through
Occurs during low-volume periods	Lacks institutional intent
Immediate reversal after break	Trap confirmed

Fakeouts aren't accidents—they're traps designed to create liquidity for larger players.

10-Point Breakout Checklist

Use this 10-point checklist before committing to any breakout trade:

#	Question to Ask
1	Has the level been tested more than once?
2	Is there a visible buildup or tight range before the break?
3	Was liquidity swept before the break? (e.g., previous swing high/low taken out)
4	Did the breakout candle close beyond the level?
5	Is the candle body large and wick minimal?
6	Does the move align with higher timeframe structure?
7	Is the breakout occurring during a liquid session?
8	Is there follow-through in the next candle?
9	Are you trading after the close, not mid-candle?
10	Do you have a clear stop-loss and invalidation point?

Breakout Trading Process (Based on Price Action)

Step	What to Do
1	Identify key level (support, resistance, range top/bottom)
2	Watch for liquidity sweep near that level
3	Wait for a strong close above/below
4	Confirm intent: large body, next candle continuation
5	Enter on breakout or retest with structure support
6	Place stop behind breakout base (not tight!)
7	Target next clean level

Trader’s Mindset Tip

Most losing breakout trades come from FOMO not confirmation.

Wait for price to close and show intent. Don’t guess. React.

Smart money uses false breakouts to trap emotional traders.

Your job is to trade like the hunter, not the hunted.

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This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplies by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.

Autor

Jasper has been in the markets since 2019 trading currencies, indices and commodities like Gold. His approach in the market is heavily accompanied by technical analysis and of course, supported by fundamentals. He has a background in trading proprietary firms and has been teaching students how to navigate themselves in the markets from basic to advance concepts.

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Breakouts and Fakeouts in Price Action – How to Trade Real Moves, Not Market Traps

Goal of This Lesson:

Recap: Where We Are in the Price Action Series

Real-Life Analogy

What Is a Breakout?

The Price Action Anatomy of a Real Breakout

1. Structure Before the Break

2. Candle Behavior

3. Price Context & Timing

Common Traits of Fakeouts

10-Point Breakout Checklist

Breakout Trading Process (Based on Price Action)

Trader’s Mindset Tip

Start Practicing with Confidence — Risk-Free!

Check Out My Contents:

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