False Breakout (Fakeout)

A false breakout, also called a fakeout, happens when price pushes beyond a level such as a range high, a trendline or a chart-pattern boundary, fails to follow through, and closes back inside. It traps the traders who entered on the break, and their exit orders often fuel the reversal, which is why the move back through the level can be quick. False breakouts cluster around obvious levels where stop orders build up, and around thin liquidity or major news. Traders limit their exposure by waiting for a candle to close beyond the level, by requiring a retest that holds, or by checking whether momentum expands after the break. Some strategies deliberately trade the failure, entering once price reclaims the level.