How I Spot Fakeouts During Live Trading
Most of the beginner trader, often struggles how to spot fake out and catch the real move. Although there is no predefined way to how to spot or avoid fake out in trading. Today i’m gonna tell you how i spot fake out during my trading hours. Which strategies i use to spot fake outs in trading. I’m gonna list some ways below to avoid fake outs based on my experience and observation in the markets.
Inducement
It is established by the big players to trap the retailers before the real move starts in your direction or against your direction. Here i’m gonna explain you with some examples of some strategies.
Bullish Scenario
- Let’s say if you trade on support and resistance strategy. Meanwhile suppose that you mark the support on h1 time frame and your bias is bullish for the day. However you are looking only for the long positions today. Meanwhile what big players does that they form the inducement before you support level to make their order executed at their price. Now what retail trader does that the market reacted before their level, so they instantly goes for long but it was the trap so later on they get stopped out and became their liquidity. So how to avoid this? The only answer is wait patiently for you level to be tapped by the market, in case no tap. no trade. That’s what i follow during my trading hours.
Bearish Scenario
2. Now take example of another strategy which is very prevalent between the traders is orderblock which is abbreviated as the ob. In the above point i took the example of bullish structure, here i’m gonna take the bearish structure example. Let’s suppose you marked a bearish order block in the bearish structure continuation. Now you’re waiting for the price to tap your level so that you can enter for selling trade. Meanwhile what happens just before some pips from you zone or level the price started falling down. So retailers enters in this rally in fomo and they get stopped by the big player who generated inducement for their trade to get executed at their own price.
The only way is to prevent yourself from this fakeout is to wait patiently for your zone to be tapped by the. For this you need to improve your trading psychology.
Liquidity At Key Zone
This is the most widespread topic amid the beginner trader or someone who is new to markets. Here we are gonna talk about what is liquidity and how you can use it for your own good. Let’s understand what is liquidity?
Liquidity is money in the market but in trading terms we call it liquidity and the every markets needs liquidity to run. Similarly just like the economy, we need to put some capital in the economy to boost it. Same goes in the market too if you want to move the in the bullish or bearish direction then you need liquidity to move it.
How To Identify Liquidity
Although there is no textbook way to identify the liquidity but i would suggest you what i do. I trade on support and resistance strategy. So most of time the liquidity is below the support in bullish structure and above the resistance in bearish structure. So when i enter in the trade, i usually put my sl according to the liquidity. In simple terms if the liquidity is taken then i put very tight stop loss of 10-15 pips. On the other hand, if price hasn’t taken the liquidity then i’ll wait for the price to take liquidity or i’ll give some space to my trade to take the liquidity by putting the sl a little bit deeper.
Weak Bos Vs Strong Bos
Let’s understand first what is bos? Bos refers to the break of structure in the trend continuation and it is completely different from choch which is change of character. Break of structure indicates following the current trend. Like if the structure is bullish and the price close above last high then it’s a bullish break of structure. In addition, if price the price trades under bearish pressure and the price close below last low then it’s bearish or downside break of structure. Now the question raises how to spot strong or weak bos. Here i’m gonna suggest you some identical to spot weak and strong bos.
How To Identify Weak & Strong Bos
Well i usually look for the the 2 candle closing in my direction or bias. However the 1 candle is also enough to indicate the trend continuation. But think for a second, if market is going to move in your direction or bias then it can close many candles in your favored bias, so why not wait for the double confirmation. Btw this is the way which i use to spot the strong bos btw it isn’t guaranteed but it works for me most of the time. Hope this works for you if it suits you can try.
Identifying Trend In Ranging Markets
This topic might be very confusing for the beginners who are starting their in the market. By the way every trader gone through the same process. The question comes up what is ranging markets? Ranging markets is often known as consolidation, when the market trades under latest high and latest low in bullish structure or in bearish structure. This happens when the market doesn’t have enough liquidity to move in the any direction. Most of the traders even the experienced ones struggles to trade in consolidation.
Ways To trade In Consolidation
- The best practice i do when the the markets are ranging is, i just sit patiently and wait for the price to give breakout or breakdown in the certain direction.
- The another one is switch to h1 time frame and look for the trade in h1’s time frame direction. Btw trading h1 time frame will help you to reduce your fomo and it will teach you the how sit quietly and patiently while the price approach your trading level.
Final Thoughts
Trading isn’t about reacting to the every movement but it is about understanding the behaviour and the psychology behind the price and the movement. Well this study is based on my experience and observation of the markets. Always do your own study and research before before believing in my study and observation.
Check out my How I Analyze The Charts section