The Fakey Trading Strategy: A Slightly Expanded Guide

The Fakey—a false breakout of an Inside Bar—turns typical stop-hunts into high-probability reversal entries. Here’s everything you need to know, in just a bit more detail:

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1. Pattern Anatomy

Mother Bar & Inside Bar

• Mother Bar: A larger candle defining a clear range.
  

• Inside Bar: A smaller candle fully contained within the mother bar’s high–low.

False Breakout

• Price briefly pierces the inside bar’s extreme, luring breakout traders into buy-stops or sell-stops.
  

Swift Reversal

• Price snaps back and closes inside the mother bar’s range, trapping those breakout traders and kicking off a genuine move in the opposite direction.

2. Key Trading Contexts

Trend Continuations:

• Buy Fakey on pullbacks in an up-trend at dynamic levels (e.g., 20 EMA, previous swing low).
  

• Sell Fakey on rallies in a down-trend at trendlines or Fibonacci retracements.

Range Reversals:

• Fakeys at support/resistance lines of a well-defined channel often yield quick, reliable scalp or swing trades.

Major Timeframes:

• Fakeys on daily or 4-hour charts at round numbers or pivot zones carry higher statistical edge than lower-timeframe noise.

  
  
  
  

  

3. Step-by-Step Execution

1. Identify: Spot a clear mother bar + inside bar.
   

2. Mark Levels: Draw the mother bar’s high and low.
   

3. Wait: Let price breach the inside bar (the “fake” breakout).
   

4. Confirm: Look for a close back inside the mother bar’s range—volume spike is a bonus.
   

5. Enter: Place a buy-stop/sell-stop just beyond the opposite inside-bar extreme.
   

6. Stop-Loss: Position a few ticks beyond the fakey candle’s far end.
   

7. Target: Aim for 2× your risk—use the width of the mother bar, prior swing, or measured-move projection.
   

4. Risk Management & Tips

• Risk ≤ 2 % of account per trade.
  

• Logical Stops Only: Align stops with pattern invalidation, never arbitrary pips.
  

• Confluence Required: Add at least one extra factor—moving average, trendline, or pivot.
  

• Avoid News: Steer clear of setups during high-impact economic releases.
  

5. Mini Walkthrough Example

On EUR/USD 4H:

• A narrow inside bar forms at the 50 EMA.
  

• Price spikes above the inside bar high (fake-out), then closes back inside.
  

• Enter a sell stop just below the inside bar low.
  

• Place the stop above the mother bar high.
  

• Target the next swing low—achieving a 1:2 risk-reward.
  

By slightly expanding your entries with context checks and precise stops, the Fakey pattern becomes not just a trap to avoid, but a reliable tool to profit from market reversals. Trade patiently, journal each Fakey, and watch your consistency improve.

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