Whether your scalping, day trading, or swing trading, it’s very frequent to run into a False Breakout, or like the experts call it, a Fakeout.
And knowing how to avoid a False Breakout is essential for two reasons.
First of all, because otherwise you’ll get trapped into the wrong trade like many beginner traders to.
Second, because you can turn this situation to your advantage and make money from trapped traders.
In the trade discussed below, which we took on our TradingView chart, we came across a False Breakout.
Actually, it’s a False Breakout in a more widespread false uptrend.
Yes, because the whole upward movement is false!
How can we be so sure?
Not only we have the RSI Exhaustion which is exhausted, but it is also significantly diverging from the price.
So the RSI Exhaustion goes down, while the price goes up.
Additionally, the price broke up a resistance but then immediately formed a market top, which is displayed by the Bottoms Tops Signal.