A breakout looks exciting. Price pushes above resistance or below support and everyone screams “it’s going to the moon.” But not every breakout is real. Many are designed to trap emotional traders before reversing hard.
Fake breakouts usually happen when price moves beyond a key level without strong volume support. If the candle closes weak or quickly pulls back inside the range, that’s your first warning sign. Real breakouts show continuation and strong follow-through, not hesitation.
Another red flag is when the move happens during low-liquidity hours. Smart money often pushes price slightly above a level to trigger stop losses and breakout entries, then reverses the market once liquidity is collected. This is called a liquidity grab.
Watch the retest carefully. A true breakout often retests the broken level and holds it as new support or resistance. A fake breakout fails that retest quickly and falls back into the previous range.
Momentum indicators can also help. If price breaks out but RSI or volume shows divergence, the move may lack strength. Strong structure plus strong volume is what confirms conviction.
The key is patience. Don’t chase the first candle. Wait for confirmation, wait for structure, and protect your capital. Most traps catch traders who move too fast. Smart traders wait for proof before committing.