Forex glossary
Fakeout
A fakeout is a move beyond a defined level or range boundary followed by a return inside under a specified time or closing rule. It is usually identified after the event. The return does not prove deliberate manipulation, and no single confirmation filter eliminates such failures.
Illustrative example
How does it work in practice?
Assume resistance at 1.1000, a move to 1.1012 and the next candle closing at 1.0995. Under a rule requiring a return within one candle, this would be a hypothetical fakeout.
A case to work through
A wick-only return
Hypothetically, resistance is 200; after a breakout, the next bar has low=199.5 and close=201.
- The fakeout rule requires a close below 200 within two bars.
- The low returns inside, but close=201 does not yet meet that rule.
What follows? Record a retest and check the next permitted close.
Example boundary: A wick-based rule would classify it differently; choose the rule before assessment.
A useful distinction
Fakeout / Pullback
A fakeout requires a specified invalidating return; a pullback is a retracement that need not meet that condition.
Check your understanding
Apply a return criterion without inferring market intent.
Show the answer and explanation
No; the required close is needed
The rule checks the close rather than the low.
From observations to price structure
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Related terms
Sources and documentation
- StockCharts – support and resistance
Reaction zones, break criteria and possible role reversal of levels.
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