What it means
Smart Money traders read most fakeouts as liquidity sweeps.
In practice
A failed break is useful information: the traders who entered on it are now trapped and will have to exit, which adds fuel in the opposite direction. Some traders wait specifically for a break that fails and enter once price closes back inside.
Signs of a likely fakeout include a break with no follow-through, a long wick beyond the level, and a break that runs straight into a higher-timeframe level.
What to watch for
A real breakout often pulls back to the level before continuing, which looks like a failure for a moment. Wait for a close back inside before calling it false, and keep the stop beyond the extreme of the failed move.
Related terms
3 terms- BreakoutPrice closing beyond a level or pattern, ideally on strong volume, and staying there.
- Liquidity sweepPrice wicking through an obvious high or low to take the stops, then closing back inside and reversing.
- Turtle soupFading a failed run above an obvious high (or below a low) once price fails back inside and shifts structure.