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Patterns › Breakout vs False breakout

Look-alikes

Breakout vs False breakout

They look alike, so beginners mix them up. Here is what each one means, and how often each one worked on real charts.

Breakout

Price closed above resistance on strong volume. The ceiling broke.

A breakout happens when price closes above a resistance level that held before. In our library it must close clearly above the level, on a green candle, with volume at least 1.5 times the recent average. The old ceiling may now act as a floor. But many breakouts fail and fall back, so traders watch closely.

Jumping in when price only pokes above the ceiling during the candle but closes back below it.

The breakout in full ›

False breakout

Price broke above resistance, then fell straight back below it. A trap.

A false breakout starts like a real one: price breaks above a resistance level. Then it quickly falls back below the level, which shows the push had no real strength. In our library the breakout candle closes above the level, and the very next candle must be red and close back below it. The idea after this trap is that price falls, as buyers who chased the breakout may rush to get out.

Chasing every breakout the moment it happens, without waiting to see if it holds.

The false breakout in full ›

Real odds side by side

PatternFoundTarget firstStop firstWent nowhere
Breakout2,25240%56%4%
False breakout70339%53%8%

Counted by the Trading Class research engine on real past candles: entry at the signal candle's close, target 1.5 × ATR(14), stop 1 × ATR(14), 12 candles to decide, a candle that touches both counts as the stop. How we count. Past data, not a forecast and not advice.