How to Trade Fakeouts
Chart Patterns (Part 4)
In a head and shoulders pattern, you can assume that the
first break tends to be false.
You can fade the breakout with a limit order back in the
neckline and just put your stop above the
high of the fake out candle.
You could place your target a little below the high of the
second shoulder or a little above the low of the second shoulder of the inverse
pattern.
The next pattern is the double top or the double bottom.
Traders just love these paterns! Why you ask? Well it is
because they’re the easiest to spot!
When price breaks below the neckline, it signals a possible
trend reversal. Because of this, plenty of traders place their entry orders
very near the neckline in case of a reversal.
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