• By admin
• 10 May, 2023

You often encounter a phenomenon called a Fakeout in trading, I have taught such price action for four years, in fact it is mentioned in most of my writings.

Fakeouts are an integral part of trading and chart analysis. When an asset moves with momentum or follows a trend, it faces challenges from the market in the form of support and resistance levels.

These levels can appear horizontally (WZRD Lines), Trendlines, or within chart formations though most are identified through chart patterns.

As traders, we observe the market and study how it behaves in these sophisticated zones. The way price interacts with support and resistance is crucial.

⚠️ Often, a strong reaction from support/resistance will lead to the next significant move. In many cases, this proves more effective than waiting for confirmation 🔑

A fakeout can manifest as a false breakout attempt, either through a single candle from a WZRD line or multiple candles from a chart pattern. 

🚨 It essentially signals to the market that the initial movement was a mistake, and the price wants to reverse and align with the original market sentiment. When this happens, many traders hit their stop-losses (SL) since these are typically placed slightly above or below significant lines, prices, or zones ⛽️

🔮 So, Which is Stronger - Confirmation or Fakeout?

While both elements are equally important to price action, fakeouts often prove stronger than regular confirmations 👀

This is because fakeouts occur in markets with an established dominant trend, where price is either attempting to continue its movement after a failed counter-trend move, or the dominant trend is yielding to opposing pressure.

It demonstrates that one side of the market maintains control and frequently results in better and more sustainable price movements.

💭 Main Risks to Consider

Fakeout trading strategies do not perform well in range volatility market conditions. You should only apply these methods in trending markets.

Whether you're trading fakeouts or confirmations, you need strong and perfect defined support/resistance levels. WZRD lines provide perfect reference price, and no other methods can match their accuracy, no lines get kisses from the market like WZRD lines do everyday 🏆

You can trade fakeouts with confidence when using WZRD lines as your guide.

I have provided two examples below with WOO/USDT and BTC/USDT, with Bitcoin it was a live example yesterday which played out perfectly 😁

Example:

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