Trading term
What is Fakeout (false breakout)?
A fakeout is a breakout that fails: price closes through a level, or pokes past it on a wick, and then comes back inside within a few bars. The traders who bought the break are trapped, and the level has held after all.
A fakeout has two shapes. In the first, price only wicks through the level and closes back inside on the same bar. In the second, price actually closes beyond the level, looks like a real breakout for a bar or three, then closes back on the wrong side. Both end the same way: the level held, and everyone who acted on the break is offside.
The reason they're so common is that a level is where the orders sit. Stop-losses cluster just past support and resistance, and breakout buy orders sit just above resistance. A push through the level fires all of them at once, which is exactly the burst of buying a real breakout looks like. The difference shows up afterwards: a real breakout keeps going, or comes back and holds the level as new support. A fakeout gives it all back.
That's why the standard advice is to wait for a close beyond the level, and then for what happens next. The close filters out the wick-only pokes. The follow-through, or a retest that holds, filters out the failed breaks.
For example
A stock sits under $108 for months. One day it closes at $110 on ordinary volume. Buyers pile in. Three days later it closes at $106, and two weeks after that it's at $96. The tool's read of that chart says: closed above $108, then closed back below it. A failed break.
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Explore Premium →Why it matters to you
Chasing a breakout is one of the most reliable ways to lose money on a chart, and the fakeout is the mechanism. If you know what one looks like, you stop buying the first poke through a level and start asking whether the break held. That single habit removes a whole class of losing trades.
⚠ A wick is not a break
Price touching or piercing a level on a wick tells you someone tried and was rejected. It is not a breakout, and treating it as one is how people buy the top of a range. Wait for the close.