I've noticed that many beginners lose money on the same pattern — when the price breaks a level but then sharply reverses back. This false breakout is actually a very common phenomenon, and if you learn how to trade it, you can make good profits.

The idea is simple: the price approaches an important level, slightly breaks it, triggers stop orders of traders who are just beyond that level, and then moves in the opposite direction. This is commonly called a stop hunt. To start recognizing these moments, you need to correctly set support and resistance levels — drawing them according to a trend reversal strategy.

When I began analyzing false breakouts more carefully, I identified several key factors. The first is the speed of approaching the level. If the price moves in large candles and quickly reaches the level, it’s very different from when it approaches slowly with small candles. Aggressiveness in movement is always visible during a false breakout.

The second factor is a distant retest. I mean a situation where the price approaches the level not for the first time, but after a significant amount of time has passed. The third factor relates to ATR — this indicator shows the average distance the instrument moves over a period. If a candle moves much farther than its norm, it suggests that there may not be enough energy to continue the movement.

Another important nuance is where the previous candle closed relative to the level. If it closed far from it, this strengthens the false breakout signal.

So, there are four factors for trading. You should only enter after the false breakout has already occurred, and it must be above the level. I set the stop-loss just beyond the tail of the candle; if the breakout was small — about two percent. If the breakout was more serious, the stop can be placed just beyond the level itself. This provides more room but also increases the risk.