How to Trade Fakey Pattern

 

Hello, Last week we kicked off our three part series on pin bar trading strategies with Pin Bar Strategy-How To Trade It. For our second installment on pin bar trading strategies, we’re going to learn how to trade a tricky but rewarding trading strategy, called the the fakey pattern. Some of you’re probably wondering,  Is this something straight out of an American football playbook”? No, the fakey pattern  is a trading strategy popularized by renowned Australian forex trader, Nial Fuller.  Nial Fuller describes it as “a reliable indicator of potential near term(and sometimes) long term market direction. I guess the first question we should be asking ourselves is

What is a Fakey Pattern?

Basically a fakey pattern is the false break of an inside bar structure. Price goes in one direction, but then does a sharp reverse, creating a false break of the inside structure.  The main feature of  the fakey pattern is the running  of stop losses by veteran traders. They create this huge vacuum by trying to lure naive rookie traders, thus creating this huge black hole in the market. Unfortunately the price then does a sharp 360 and reverses in the opposite direction. It’s as if the big time traders are playing a prank on the amateurs.

These same veteran traders also cause the fake pattern when they react to a major market event . which has caused price to sharply turn the opposite direction from an initial breakout. So if an inside bar creates a false break at the resistance level, the price moves downward opposite the the direction of the initial breakout.

A Few Examples of Fakey Set ups

bullish-bearishAbove are classic illustrations of bearish and bullish fakey signals. The inside bar  creates the  illusion or false breakout of the inside bar pattern, resulting in the formation of the fakey pattern.

Note of Caution

Not every fakey signal comes out with an inside bar pattern.In some cases, the fakey signal may have a pin bar pattern where you have only one bar as opposed to the two bar false break. You may also run into three bar false breaks although those scenarios are quite rare.

fakey-reversal

Here we see a bullish pattern with a pin bar reversal acting as the false break of the inside pattern.

Which finally brings us to

How To Trade A Fakey Signal

You can trade a  fakey signal in  ny market condition except a choppy market. Why? Because conditions are not too favorable for trading fakey signals. But you can trade fakeys in a trending market, or range-bound market, or even against the trend,- if it’s at support or resistance level. The fakey should provide  you with an high probability entry point as well as a stop loss placement.

If the fakey forms at the level of support  you place your stop losss just below the lowest point of the two bar false break. However, if you want to make a trade make sure the fakey  is at a level of confluence i.e. the support level and the uptrend.If  fakey signal forms at key resistance levels, that’s a great opportunity to enter a sell trade.

 

bullish-bearishfake.png

So as you can see below you have fakeys developing at bot levels of support and resistance levels. These two scenarios create great opportunities to make trades.

If you’re still pulling your hair out over support/resistance levels,consult  my Identify Support and Resistance Levels With Price  Action Analysis post.

If you’re stumbled in here looking to join the forex trade bandwagon look up Why Forex Trade Is So popular.  Next,if you want to give your trading skills an edge by relying on pure price action trading/analysis,  instead of fancy forex robots,  get started with What is Price Action Trading?  and then build up from there by reading the other price action posts on the blog.

That’s a wrap for “ How To Trade Fakey Pattern.” As you can see fakey patterns can be useful if you ‘re alert enough to spot the opportunities.  If you’re a  rookie trader look out for those black holes created by veteran traders or else you could get sucked in easily.

Next time we’ll finish our final installment – the Inside Bar pattern. If you missed the first lesson on the pin bar set up, or you want to review, click here.

If you’ve stumbled in here wondering what price action trading is all about refer to What Is Price Action Trading?  And if you’re curious about forex trading, find out Why Forex Trade Is So Popular?

Till next time, take care.

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