Understanding Fakeout vs Breakout vs Retest in Forex Trading 🔍📈
🧠 Explanation (Long Form - Summary):
1.🔁 Fakeout – The Trap! 🪤
-A fakeout occurs when price breaks out of a structure, such as a trendline or a support/resistance level, but then quickly returns to the previous zone.
-This is often seen as a bull or bear trap, luring traders to enter based on a false breakout, only to reverse direction.
-Example:Price breaks above resistance→traders go long→price reverses and drops back inside the range.
📌Tip:Avoid entering trades without confirmation or volume support during breakouts. ✅
2.💥 Breakout – The Real Deal!🚀
-A true breakout happens when price pushes past a level and continues in the same direction with strong momentum.
- It doesn’t retest the broken structure immediately. Instead, it powers forward.
-Breakouts are usually backed by high volume, news events, or major sentiment shifts.
📌Tip: Ideal for momentum traders. Confirm with indicators or volume spikes. 📊
3.↩️ Retest – Smart Entry Opportunity 🎯
- A retest occurs after price breaks a structure and then returns to test the same level it broke, bounces off it, and continues in the breakout direction.
- This gives a second chance for traders to enter with lower risk.
- Retests offer strong confirmation the breakout is valid.
📌Tip: Enter after the bounce with a tight stop below the retested level. 🛡️
📷 Image Breakdown:
- Top chart: Fakeout — notice how price breaks upward but immediately falls back inside the pattern.
- Middle chart: Breakout — price shoots out of the pattern with strong continuation.
- Bottom chart: Retest — breakout, pullback to the structure, then continuation in the same direction.
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