THE FAKEOUT
             THE FAKEOUT               For a better understanding of liquidity please refer to the   Order Flow   and  Liquidity Gap   articles.   What is a Fakeout?   Fakeout is also known as False Breakout,  Shakeout, Sellers/Buyers/Bull/Bear Trap, Stop Run, Stop Hunt and  Liquidity Spike. It’s a search of liquidity followed by a change in  direction.   Why does it happen?   There are different scenarios and  situations of why it happens. However, the main reason behind it is to  create liquidity in an illiquid market - by big funds, to test a level’s  strength.   To elaborate more on that, a short example is required:   Let’s say price of a financial  instrument is rising to a value of significant history at 100  (resistance level) where the majority of traders will either buy a  breakout with stops below 100 or sell on rebound with stops above 100.  The price moves higher to 105 triggering on its way seller’s stops and  buyer’s orders, but price doesn’t get any higher...



 
 
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