🔥 Introduction
False breakouts are traps where price appears to break a key level but reverses sharply, causing losses. Candlestick traps are specific patterns that warn you of these false moves.
This guide covers:
- What are false breakouts and candle traps?
- Common candle traps to watch for
- How to spot and avoid them
❌ What is a False Breakout?
Price briefly crosses support/resistance or trendline, triggering entries, then reverses strongly against traders.
🕯️ Common Candle Traps
| Pattern | What It Means |
|---|---|
| False Breakout Candle | Candle closes just above/below level, but wick shows rejection |
| Pin Bar with Long Wick | Shows price rejection and fake breakout |
| Inside Bar after Breakout | Market hesitation after breakout |
🔍 How to Spot Candle Traps
Look for long wicks opposite breakout direction
Check if the candle closes back inside support/resistance zone
Volume spike with no follow-through
Failure of confirmation candle next bar
🛡️ How to Avoid Candle Traps
Wait for confirmation candle after breakout
Use volume to confirm strength
Combine with RSI divergence or other momentum signals
Avoid trading breakout on low volume
📉 Example
BTC breaks resistance with a long wick candle but closes back below
Next candle is bearish confirming rejection
✅ Avoid entering on initial breakout candle; wait for confirmation