In the volatile world of the Forex market, the Fakey pattern is considered the ‘golden key’ to open the door to profit opportunities. It not only helps you identify when you’re ‘faking’, but also shows you how to successfully ‘tune in’. Let’s analyze more deeply the structure, classification, and meaning of this model with Forex Trading. From there, you can apply it to your trading strategy effectively.
What is a Fakey pattern?
Fakey pattern, also known by other names such as Bear Trap, Bull Trap, or price trap pattern. This is one of the popular patterns in the Price Action trading method. This pattern focuses mainly on price action.
The Fakey candlestick pattern begins with a break of the price trend from the inside bar candlestick pattern. However, instead of continuing in the direction of that breakout, the price turned in the opposite direction, creating a false breakout. This false breakout is the main highlight, making the Fakey candle a strong signal in technical analysis
Structure of Fakey pattern
The structure of the Fakey candlestick pattern includes the following components:
- Mother Bar: This is the largest candle in the pattern. Acts as a ‘wall’ around other candles. It represents a wide trading range, which is often a sign of strong price movements.
- Inside Bar: One or more smaller candles that are completely within the price range of the mother bar. Inside bars represent indecision and accumulation in the market, as traders are waiting for a clearer signal about the next direction of price movement.
- Fakey Breakout: This is the key point of the Fakey pattern. Once the inside bar is formed, the price will challenge it by breaking the inside bar’s high or low, but fails to sustain it and closes back inside the mother bar’s range. This creates a ‘trap’ for traders. They think a real breakthrough has happened, but that hasn’t happened.
- Breakout Direction: The Fakey candlestick pattern can point up (bullish) or down (bearish). This direction depends on the general trend of the market and the location of the pattern.
See more: Analyze & forecast trend effective candlestick pattern
Classification of basic fakey patterns
Basically, Fake candles can be classified into 2 main types. This classification is based on the direction of the false breakout and the associated market sentiment
Bullish Fakey
- Appears during an uptrend or at a support zone.
- Formed when the price breaks above the inside bar low but then closes back inside the mother bar range.
- Usually signals an impending strong upward move, as traders realize that the breakout to the downside is unsuccessful and begin to buy.
Bearish Fakey
- Appears during a downtrend or at a resistance zone.
- Formed when the price breaks above the inside bar high but then closes back inside the mother bar range.
- Usually signals an impending strong bearish move, as traders realize that the breakout to the upside is unsuccessful and begin to sell
Meaning of Fakey pattern
When it comes to technical analysis, Fake candles play an important role in helping to predict the market’s next price action, especially in the Forex market. Below are the main points about the meaning of the Fakey candlestick pattern.
Reversal signs
The Fakey candlestick pattern is often seen as a sign that a price reversal is possible. When the price fakes a breakout through the inside bar’s high or low but fails to sustain it and falls back inside the mother bar’s range, it signals that the demand or supply at that price level is not strong enough to maintain the direction. new move.
Reflects market psychology
The Fakey candlestick pattern reflects changes in market sentiment. When traders realize the breakout failed, they can quickly reverse their position. This creates a strong price move in the opposite direction.
Trading trap
The Fakey pattern is also known as a “trading trap” because it can trick traders into opening positions based on fake breakouts. The aim is just to see the price turn around and move in the opposite direction.
Trading opportunity
For experienced traders, the Fakey candlestick pattern provides the opportunity to enter orders with high profits. They see price reversal signals and place orders with appropriate risk management.
Trend confirmation
The Fakey candlestick pattern can be used to confirm the continuation of the current trend if, after the false breakout, the price continues to move in the direction of the initial trend.
Overall, the Fakey candlestick pattern is a powerful technical analysis tool. Traders can know the important times when the market is likely to reverse. However, it also requires a deep understanding of market psychology. Above all, risk management skills are indispensable to be able to trade effectively.
How to distinguish the Fakey pattern from other candlestick patterns?
To distinguish the Fakey candlestick pattern from other candlestick patterns, you need to pay attention to the following specific characteristics:
Check the candle structure
- The Fakey candlestick pattern consists of a large mother bar and one or more smaller inside bars that are completely within the mother bar’s range.
- This is different from other candlestick patterns because it does not combine the mother bar and inside bar.
Look for fake breakouts
- An important characteristic of Fakey is the occurrence of a false breakout. This occurs when the price breaks above the inside bar’s high or low but then closes back inside the mother bar’s range.
- Other candlestick patterns usually do not have this false breakout characteristic.
Determine the appearance location
- Fakey candlestick patterns often appear at important points on the chart. Especially at support/resistance areas or after a period of accumulation.
- Other candlestick patterns can appear anywhere on the chart. Not necessarily after a period of accumulation.
Analyze market sentiment
Fakey candles reflect changes in market sentiment and trader indecision. This is not often seen in other simple candlestick patterns.
Incorporate additional analysis tools
- To confirm the Fakey candlestick pattern, you can use technical analysis tools. Typically trend lines, technical indicators or Fibonacci levels.
- Other candlestick patterns may not require confirmation from these additional analysis tools.
In general, distinguishing the Fakey pattern from other candlestick patterns requires careful observation. In addition, it is indispensable to understand market structure and psychology.
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How to trade with Fakey
The Fakey pattern provides powerful trading signals, but to fully utilize its potential, you need a specific trading strategy. Below are three different approaches to trading with the Fakey candlestick pattern.
Method 1 – Enter orders according to the rules with pin bar candles
This approach requires you to wait until a pin bar candlestick forms after a Fakey. Pin bar candles usually have a small body in the middle and a long shadow on one side. This indicates a strong reaction from one side above or below. When a pin bar candlestick appears after a Fakey, you can confirm the trading signal and open an order in the direction of the pin bar candlestick’s reaction.
Method 2 – Wait to buy (sell) at the top (bottom) of the inside bar
In method 2, after identifying the Fakey candlestick pattern, you wait for the price to react and continue in the original direction of the inside bar. When the price continues to move and reaches the top or bottom of the inside bar, that is the entry point. This way you can take advantage of the market reaction after the false breakout. Make sure you don’t get “bought high” or “sold low”.
Method 3 – Wait to buy (sell) at the top (bottom) of the mother bar in Fakey pattern
The mother bar is a candle with a larger body, completely covering the inside bar and the false breakout. In method 3, after identifying a Fakey candlestick pattern, you wait for the price to react and continue moving in the original direction of the mother bar. When the price continues to move and reaches the top or bottom of the mother bar, that is the entry point. This ensures you wait for the market reaction and make the most of the trading opportunity.
The above 3 approaches provide flexible options for trading with the Fakey candlestick pattern. Of course, it depends on your trading style and specific market situation. This helps you fine-tune your strategy to suit your needs and trading goals.
Conclude
The article has shown that understanding and effectively applying the Fakey pattern is very important. They help identify profitable trading opportunities and increase your chances of trading success. Therefore, it is not surprising that the candlestick pattern has become one of the popular tools. Knowledge related to Fakey Candles will continue to be updated by Forex Trading. Follow now not to miss useful information!
FAQs
How to use the Fakey pattern to spot trading opportunities in a market with a clear trend?
The Fakey candlestick pattern often appears after an inside bar pattern. It can indicate a reversal or continuation of the current trend. In a trending market, the Fakey pattern can provide an opportunity to enter a trade in the trend when price fakey breaks out and then returns in the direction of the primary trend.
How to combine the 2 top 3 bottom models with the Fakey pattern to optimize trading decisions?
The 2 top 3 bottom pattern is a reversal pattern. When it appears together with the Fakey pattern, it can strengthen trading signals. If the Fakey candlestick pattern appears at one of two tops or after three bottoms, it can be a strong signal for a potential price reversal. Traders can wait for a false breakout after the 2 top 3 bottom pattern. Finally, enter an order in the expected reversal direction.
When analyzing the Fakey pattern, what factors are the most important to determine when to enter a trade and place a stop-loss?
The most important factor when analyzing the Fakey candlestick pattern is market confirmation. This can include a false breakout and a subsequent price close in the desired direction. Place stop-loss after the lowest or highest price of the Fakey candlestick pattern. This will help limit risk if the market does not move in the predicted direction.
