False breakout in forex trading

However, there are things that traders recognize as signals to act. It is individuality that determines what somebody usually does in a certain situation. Compare it to football again, if a striker sees goalkeeper off his goal, he knows that there is a chance to attempt a strike at a goal. He decides how.
Let’s see now what events represent signals in trading.
It might easily happen that a reader is not sure whether a signal he sees is good or bad. Therefore it’s important to, at least, have a tool to differentiate g god signals from bad signals when you get to know what those signals are. This is among the first steps to improving your skills in reading the charts.
Let’s take a look at some signals which are to be understood s some basic filters and not general rules. It should give you just an idea of what it looks like and what it means, so that you can build up some confidence when deciding what action to take in the examples shown you will see some simple daily pun bar strategies charts and for hour-charts.
Looking for false breaks out levels is something you could do.
A reveal rejection signal with a tail means that it is a signal of high probability.
A signal as a trail of a pin bar protruding through the line suggests that it is creating a false breakup level. As it means a high probability signal, it means that a market cannot sustain is current situation and there is a high probability that it would turn direction.
The below image shows pin bar protruding the key support credit a false break level.

Charts below depict more clear situations of levels being protruded, which create false breaks.


It’s better to wait confirmation rather than go for a breakout.Use for example RSI Relative Strenght Indicator to avoid false breakout

This means that it’s not a good advice to try to look breakouts. You will see that they tend to be false-breaks. Since there is no sure method to say whether a breakout is a fake or not, it makes it risky to trade it. You should know that as the market approaches key level, it loses chance to continue. So don’t go for breakout, rather wait for it to occur, than you can make a retrace entrance. Inside bars seem like breakouts, but they are rather false breaks, so that can fool you. As the image below:

When you see a pin bar with long tail, it means that it’s time for a reversal that follows sustained move.
A way to use pin bars with long tails is when they seem to work well after one directional move that is sustained. That usually marks a turning point of a market. It also can stand for trend changes on long-term.

Try searching for retracements for supporting resistance in a market. Image below shows downtrend and an uptrend in the chart. Notice that the uptrend retrace is small, however, the trend being as up with confluence in a pin bar that had market key support level. That means a good chance setup.

Try not trading chop signals. That means that you should avoid those signals seen in thick consolidation center. In example, one after one consolidation bars followed by a signal from a pin bar formed inside and if it chops, it’s less valid. You should wait for a break to confirm.

Look for confluent level, which is actually a level with at least 2 factors that supports it. Those could be resistance level that has dynamic level of EMA, obvious support, or a retrace of fifty percent, with resistance level and a key support. To break it down, if there is weight to a trade signal, that’s good. It is among the best ways to differentiate good from bad signals.

On contrary, if there is nothing to support a signal – that’s bad. Simply said – avoid those signals. A floating setup that doesn’t have any weight is only good to ignore it. If this signal happens for an hour, and nothing safe is seen, that is not for trading. In example below, that can be seen:

When you see a certain setup, don’t give too much thought about if it’s worth trading or not. The signal will be obvious and there is no need to analyze the signal itself. The market won’t go anywhere, so there is no need to rush with such kind of decision. If you are not sure whether the signal is good or not, pass on it. Also, note that there are more signals for no good anyway. And even the signals for “Yes” are not a sure winner. So don’t rush.
If something you pass turns out to be good, don’t think that you missed a chance, because signals and not “rulers”, they just suggest something, so even bad signals can turn out to be good.

Talking about passing trades is all in a trader’s day. It’s probably better to learn from passing a good trade, than to “hitting” a bad one anyway. So you’ll get to build your own list of signals as time and trades go by. Don’t forget to remain calm and patient, and know there is time and tomorrow will bring a new chance, so don’t rush.
Patience is the virtue of successful traders

Don’t think that successful traders spend most of their week trading and placing calls throughout the day. Most of the people that made a certain fortune by trading actually patiently wait for their best signals. So you should rather emulate those kind of traders, start immediately with that attitude. Know that time is on your side with trading, and that the patience is your fellow traveler. But know that even then, when you only consider trading upon clear signals, it is just a signal, and you risk. Likewise, when you shot with your eyes closed, there is a chance that you can hit something, but a small one.

This advice to trade less rises from the fact that there exist far less signals suggesting good situations to trade.
On the other hand, it is a signal for a reason; it means that the certain situation is not as often as some other situation that is not a signal.

Take the most of your trades, and missed attempts too. Note down how the chart behaves in a certain situation, and how your trades execute.
Make your own list of filters that are good for your trading.
However, have in mind that having a list of signals and a plan for trading is of true essence for a trader, at least that’s what we think, it is just one small piece of a puzzle. To be true, this one might be one of the basic ones, but still a piece of a puzzle. This puzzle, however, has something besides checking and confirming that pieces match; here you actually still have to guess the outcome. Because, anything that you can write down is something that had already happened, what you buy or sell, is something which’s outcome is to be yet seen. So to say, a successful trader has to have a good intuition (the intuition must be based on some sort of statistics here).
In conclusion we can say that it is very important to understand truly how to recognize good signs for a trade. Filtering signals is thus important to make success rate higher. You’ll notice that majority of the traders (who don’t read this) just trade based on their pure guts, without any presumption about the result of what they do. Don’t be one of those traders. Be yourself, like in real life, prepare, secure your means of action, choose your goals and execute them.