The Powerful Fakeout strategy to Profit from Short Covering
Updated: Sep 4
What do Traders do when they see this Breakdown candle?
They go SHORT!!! But, hey! What just happened?
After the breakdown, the price reversed. It hit the short-sellers' stop-loss levels, and the short covering resulted in price going up. This counter move produces a trap and often leads to sharp rallies. This situation is also known as 'Bear Traps'.
The Fakeouts script is intended to catch exactly these breakdowns where the price goes below the support level but rises quickly thereby hitting short-sellers' stop losses. Since the breakdown didn't continue with the price going down, it is also called a fake breakdown or a fakeout.
Here is how the same chart looks like on the Fakeouts script -
The Fakeouts script identifies the breakdown of the last 40 to 120 candles and gives breakdown reversals signals when the price goes above the high of the breakdown candle, within 7 candles of the breakdown. The script can be seen on any timeframe (like 1-minute chart, hourly, daily, or weekly timeframe chart), although the higher the timeframe, the better it gets. Users can also set alerts on his chosen scrip, which will come in their TradingView account.
Telegram Alerts: Subscribers get alerted instantly in real-time through a Telegram channel, whenever a fake breakdown happens. For stocks listed in India, the telegram alerts are sent for daily timeframe charts for all the stocks and hourly timeframe charts for F&O stocks. For Bitcoin, Forex pairs & Indices (namely BTCUSD, USDGBP, USDEUR, USDJPY, USDAUD, USDCAD, NAS100USD, and US30), the telegram alerts are sent for hourly, 4-hours and Daily timeframe charts.
The fake breakouts (also known as Bull Traps), will soon be added to the script so that users can take SHORT trades as well on the fake breakouts.
If you also want to benefit from such fake breakdowns, take a FREE Trial of the Fakeouts script.