GM, and welcome to Day 31! ✨
Yesterday, we learned that volume confirms the strength behind a move. Today, we tackle one of the most frustrating parts of trading: seeing a price break out of a range, buying in excitement... and then watching it immediately reverse. You’re left holding a losing trade, wondering, “How could I have known that was fake?”
If you’ve ever asked yourself these questions, this post is for you. We’re going directly to the pain points.
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Your Top Breakout Questions, Answered
1. "Why do I keep getting caught in fakeouts?"
Answer:
Most likely, you’re buying the first touch of a new high. The moment price pierces a resistance level, FOMO kicks in. The market knows this and often creates a false move to trap emotional buyers before reversing. The solution is to wait for confirmation, not chase the initial spike.
2. "How long should I wait to see if it's real?"
Answer:
You’re not waiting for a specific time; you’re waiting for specific signals. A true breakout needs to prove itself. Give it at least a few candles (1-4 hours on an hourly chart) to see if it can hold above the breakout level and if volume supports it.
3. "What if I miss the move while waiting?"
Answer:
This is the critical mindset shift. It is better to miss a trade than to lose on a fakeout. Real breakouts start trends, not single candles. A strong move will give you a pullback or retest to enter. If there’s no retest and it just flies, that trade wasn’t yours—and chasing it is high risk.
4. "How do I know which resistance level is important?"
Answer:
The more times a price has tested a level (touched it and reversed), the stronger that level becomes. A level tested 3+ times is far more significant for a potential breakout than one touched only once. Focus on the levels with the most history.
5. "What's the #1 sign a breakout will fail?"
Answer:
Low Volume. It’s the most reliable warning. A price moving up on low volume is like a car accelerating with an empty gas tank—it will sputter out. No significant buying pressure = no sustained move.
6. "Is a long wick always bad on a breakout?"
Answer:
Almost always, yes. A long upper wick (a shooting star) at a breakout shows price was violently rejected higher. It means sellers aggressively defended that level. Unless accompanied by massive volume on the next candle that swallows the wick, treat it as a major fakeout signal.
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Your 3-Step "Real or Fake" Survival Checklist
To navigate this, use this simple filter. Do not buy until you can check at least 2 of these 3 boxes:
✅ BOX 1: The Volume Spike
· Is the volume on the breakout candle significantly higher than the recent average? This is non-negotiable for conviction.
✅ BOX 2: The Clean Close
· Did the breakout candle close FIRMLY above the resistance level? A close right at the line or with a long wick is weak.
✅ BOX 3: The Successful Retest
· After breaking out, does the price dip back to the old resistance (now new support) and bounce? This is the ultimate confirmation the level has flipped.
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Let’s Walk Through an Example
Say Ethereum has struggled below $3,500** for a week. A green candle pushes it to **$3,550.
The Wrong Move: Buy immediately at $3,550, driven by FOMO.
The Right Move: Pause. Ask:
1. Volume: Is the volume bar huge? (Check Box 1).
2. Close: Did it close near $3,550, or did it wick up to $3,600 and close at $3,520? (Check Box 2).
3. Retest: Can it hold above $3,500 over the next few hours, or does it fall back below? (Check Box 3).
If it passes the test, the retest dip becomes your high-confidence entry, not the initial spike.
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Today’s Big Takeaway: Trade the Confirmation, Not the Hype
Your goal is not to catch the very first pixel of a breakout. Your goal is to identify breakouts that have a high probability of continuing. This requires patience and a checklist.
The market will always present more opportunities. Protecting your capital from fakeouts is more important than catching every single move.
> > SAVE THIS 3-STEP CHECKLIST. <<
It is your shield against the most common and costly trading trap.
