The fakey pattern, also known as a false breakout or trap pattern, is one of the most powerful setups in price action trading. It occurs when price breaks out of a pattern only to immediately reverse, trapping traders who entered on the breakout. Learning to identify and trade fakeys allows you to profit from other traders' mistakes and avoid getting trapped yourself.
What is a Fakey Pattern?
A fakey pattern is a false breakout from an inside bar setup. It starts with an inside bar, followed by a breakout that fails and reverses back through the inside bar range. This trap pattern catches traders who entered on the initial breakout, and their forced exits fuel the reversal move.
Key Structure: The fakey has three components: (1) a mother bar, (2) an inside bar, and (3) a false breakout bar that penetrates the inside bar high or low but then closes back inside or reverses. The false breakout traps traders and creates a powerful reversal opportunity.
Anatomy of a Fakey Pattern
Understanding the components helps you identify fakeys correctly:
- Mother bar: The first bar that establishes the initial range
- Inside bar: A bar completely contained within the mother bar range
- False breakout: A bar that breaks beyond the inside bar range but fails
- Reversal confirmation: Price moves back through the opposite side
Types of Fakey Patterns
Bullish Fakey
A bullish fakey traps sellers and reverses upward:
- Inside bar forms within mother bar
- Next bar breaks below the inside bar low (false bearish breakout)
- Price then reverses and closes back above the inside bar low
- This traps short sellers who entered on the breakdown
- Their covering (buying) fuels the upward reversal
Bullish Fakey Example
Stock ABC forms an inside bar setup:
- Mother bar: High $55, Low $50
- Inside bar: High $54, Low $51
- False breakout bar: Opens $52, drops to $49 (breaks below inside bar)
- Then reverses and closes at $53 (back inside the range)
- Shorts who entered at $50 are now trapped
- Entry: Buy above the fakey bar high or inside bar high
Bearish Fakey
A bearish fakey traps buyers and reverses downward:
- Inside bar forms within mother bar
- Next bar breaks above the inside bar high (false bullish breakout)
- Price then reverses and closes back below the inside bar high
- This traps long traders who entered on the breakout
- Their selling fuels the downward reversal
Bearish Fakey Example
Stock XYZ forms an inside bar setup:
- Mother bar: High $100, Low $95
- Inside bar: High $99, Low $96
- False breakout bar: Opens $98, rallies to $102 (breaks above inside bar)
- Then reverses and closes at $97 (back inside the range)
- Longs who entered at $100 are now trapped
- Entry: Sell below the fakey bar low or inside bar low
Trading Strategies for Fakey Patterns
Strategy 1: Trade the Reversal
The classic fakey trade enters in the direction opposite to the failed breakout.
Bullish Fakey Trade Setup
- Bullish fakey forms with false breakdown to $49
- Fakey bar closes back at $53
- Entry: Buy at $54.10 (above inside bar high)
- Stop loss: Below the fakey bar low at $48.50
- Target 1: $60 (next resistance)
- Target 2: $65 (2:1 or 3:1 reward-to-risk)
Strategy 2: Pin Bar Fakey
When the false breakout bar is also a pin bar, the signal is even stronger:
- The pin bar shows clear rejection of the false breakout level
- Entry can be taken immediately after the pin bar closes
- Stop loss is placed beyond the pin bar wick
- These setups have very high probability
Strategy 3: 50% Entry Method
For better risk-to-reward, enter on a retracement:
- After fakey pattern completes, wait for price to retrace
- Enter at approximately 50% of the fakey bar range
- This gives a tighter stop loss and larger potential profit
- Risk: Price may not retrace and you miss the trade
Why Fakey Patterns Work
Understanding the psychology behind fakeys makes you a better trader:
- Breakout traders enter aggressively on the initial breakout
- They place stops just beyond their entry point
- When price reverses, their stops get triggered
- Stop orders are market orders that fuel the reversal
- Smart money often creates these false breakouts intentionally
- By trading fakeys, you align with the smart money
Best Locations for Fakey Patterns
Fakeys work best in specific market contexts:
- Key support/resistance: False breakouts at major levels are powerful
- Trend pullbacks: Fakeys at retracement levels in trends
- Round numbers: Psychological levels often see false breakouts
- Moving averages: Fakeys at 50 or 200 MA
- Previous day highs/lows: Common trap locations
Fakey Pattern Variations
Several fakey variations exist:
- Standard fakey: Inside bar followed by false breakout that reverses
- Pin bar fakey: False breakout forms a pin bar (strongest signal)
- Multi-bar fakey: False breakout takes 2-3 bars before reversing
- Double fakey: Two false breakouts in opposite directions
Volume Analysis
Volume confirms fakey patterns:
- High volume false breakout: Many traders got trapped, strong reversal potential
- Decreasing volume on breakout: Shows lack of conviction, likely to fail
- High volume reversal candle: Confirms the trap and reversal
Common Mistakes to Avoid
- Trading in ranges: Fakeys in sideways markets are less reliable
- Ignoring the trend: Counter-trend fakeys have lower success rates
- Entering too early: Wait for the fakey to fully form before entering
- Too tight stops: Give the trade room beyond the false breakout level
- Trading every fakey: Only trade high-quality setups at key levels
- Missing the inside bar: Fakeys require a valid inside bar first
Fakey vs Failed Breakout
These terms are related but not identical:
- Fakey: Specifically requires an inside bar setup first
- Failed breakout: Any breakout that reverses (broader term)
- All fakeys are failed breakouts, but not all failed breakouts are fakeys
- The inside bar setup gives fakeys more structure and predictability
Timeframe Considerations
Fakeys work on multiple timeframes:
- Daily charts: Most reliable, excellent for swing trading
- Weekly charts: Powerful signals for position trades
- 4-hour charts: Good for shorter swings
- 1-hour charts: Usable for day trading with extra caution
- Below 1-hour: Many false signals, high noise
Fakey Trading Plan
Follow this systematic approach:
- Identify the market context (trend, key level)
- Spot an inside bar setup forming
- Watch for a breakout from the inside bar
- Wait to see if the breakout fails and reverses
- If a fakey forms, determine entry method
- Set stop loss beyond the false breakout extreme
- Calculate target (minimum 2:1 reward-to-risk)
- Execute and manage according to plan
Track Your Fakey Pattern Trades
Pro Trader Dashboard helps you analyze all your price action trades. See how your fakey trades perform, identify your best setups, and continuously improve your trading results.
Summary
The fakey pattern is a powerful price action setup that profits from false breakouts. When an inside bar breakout fails and reverses, it traps traders and creates excellent trading opportunities. Focus on fakeys at key levels, with trend alignment, and always wait for the pattern to fully form before entering. By trading fakeys, you align with smart money and profit from the mistakes of impulsive breakout traders.
Continue building your price action skills with our guides on pin bar trading and inside bar patterns.