Trading fakeouts: strategy
As we have already established, fakeouts, or false breakout are not that uncommon. It is possible for us to see them when we see a long consolidation and are already hoping for a breakout, but people on the other side of the wire are just not letting us have all the fun and keep on pushing with sell/buying, keeping the consolidation intact.
We are now at a crossroads. What do we do? On one hand it is possible to try and trade a fakeout. But how?
Well, once you spot a movement of one of the oscillators that can indicate a fakeout you need to take a very unsettling and very unusual action – you need to go on trading AGAINST the forming trend. That is right if you see a chart breaking through the resistance line and the oscillator shows that the movement is not long-lived it is better to start selling and vice versa with the graph that is breaching through the support line.
Trading a fakeout is one of the best strategies for those who want and who are used to short trading as well as making swift decisions and fast actions. you need to have sharp eye and quick hand in order for you fakeout-shorting to work.
Of course with this strategy – trading against the trend you are going to find a lot of pushback. After all you know this trick, but a lot of people out there do not and they are going to try and buy every up movement they see. That is why trading like that is a big risk and you are not going to fins a lot of support in your strategy.
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