Fakey Trading Strategy (Inside Bar False Breakout)
The Fakey Trading Strategy is a simple yet powerful way to spot and trade false breakouts in the market. It’s especially useful for traders who want to avoid being tricked by false signals.
What Is the Fakey Pattern?
- Basic Idea: The Fakey pattern starts with an “inside bar” setup. An inside bar is a smaller candle that forms completely within the range of the previous larger candle, known as the “mother bar.”
- False Breakout: A false breakout occurs when the price breaks out of the inside bar but quickly reverses back inside the range of the mother bar. This false breakout is what defines the Fakey pattern.
- Variations: Sometimes, the Fakey pattern includes a “pin bar,” which is a candle with a long wick that shows a quick reversal. Other times, the false breakout happens over two bars instead of one.
How to Trade with Fakey Patterns
Fakey patterns can be used in different market situations, such as trending markets, range-bound markets, and even against the trend.
- Trending Markets: In a trending market, a Fakey pattern can confirm that the trend will continue, especially if it includes a pin bar.
- Range-Bound Markets: Fakey patterns in a range-bound market can indicate that the price is about to reverse within the range.
- Counter-Trend Trading: Fakey patterns that form at key support or resistance levels can signal a reversal, even if the market was previously moving in the opposite direction.
How to Identify and Enter Trades
- Entry Point: Enter a trade when the price breaks back into the range of the inside bar or mother bar after a false breakout. You can enter either as the price crosses this level (on-stop entry) or at the market price.
- Pin Bar Entry: If the Fakey pattern includes a pin bar, this can be another signal to enter the trade.
Tips for Trading Fakey Patterns
- Pattern Recognition: Not every Fakey pattern is worth trading. Look for patterns that form in important areas of the market, like near key support or resistance levels.
- Time Frames: Beginners should focus on Fakey patterns on daily charts since these signals are more reliable. As you gain experience, you can try trading Fakey patterns on 4-hour or 1-hour charts.
Conclusion
The Fakey Trading Strategy is an effective way to identify and trade false breakouts, helping you avoid being tricked by the market. By understanding how the pattern works and practicing it regularly, you can improve your trading success.
