Common mistakes and the false breakout

We close the chapter with what most often leads traders into error when dealing with patterns, foremost the false breakout.

The false breakout

The false breakout is when price apparently pierces a pattern’s level — a triangle’s side, a neckline, or a rectangle’s boundary — then quickly returns inside it, catching those who entered early in a loss. It is one of the most common traps, and is often engineered deliberately to hunt the orders of the hasty.