Trading
False Breakout
When price briefly breaks a level then reverses back.
Full Definition
A false breakout (or fakeout) occurs when price breaks through a support/resistance level but fails to sustain the move and reverses. This traps traders who entered on the breakout. Smart money often uses false breakouts to accumulate liquidity before moving price in the opposite direction.
Example
Price breaks above resistance at 1.1000, triggering buy orders. It reaches 1.1010 but immediately reverses to close at 1.0980. Traders who bought the breakout are now trapped.
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