Hey Lykkers, Have you ever seen it? A stock or crypto you’ve been watching suddenly bursts upward, breaking through a key resistance level. Your heart starts racing. "This is it!" you think. "The big breakout! If I don't buy now, I'll miss out!"

So, you hit the buy button, full of hope. But then, just as quickly as it rose, the price reverses, plunging back down and leaving you holding a bag of regrets. You’ve just been caught in a "bull trap."

It's one of the most frustrating experiences in trading. But what if you could learn to spot the fakes? Let's become market detectives and learn how to tell a real breakout from a fakeout.

A fake breakout, or a "bull trap," occurs when the price of an asset moves above a recognized resistance level, tricking traders into thinking a major upward trend is starting. But the move lacks genuine buying pressure. It's often driven by a temporary surge or a lack of sellers, not strong conviction. Once a few people start taking profits, the rally collapses.

As Equiti explains, "A bull trap occurs when a short‑lived rally through resistance quickly collapses, "trapping" late‑buying bulls with losses."

The Detective's Toolkit: 3 Clues to Spot a Fakeout

You don't need a crystal ball; you need confirmation. Before you buy that exciting breakout, check for these three things.

1. Check the Volume: The Storyteller

This is your most important clue. In a real breakout, the price movement is supported by significantly high trading volume. This shows that a lot of buyers are piling in with conviction.

Real Breakout: Price goes up, volume goes up. This is a strong, healthy sign.

Fake Breakout: Price goes up, but volume is low or average. This is a major red flag! It suggests the move is not supported by broad market interest and is likely to fail.

2. Check the Candles: The Body Language

Look at the individual candlesticks on your chart during the breakout. Are they strong, solid green (or white) candles that close near their high? Or are they spindly, with long wicks on top?

Long upper wicks, especially after a breakout, indicate that sellers aggressively stepped in and pushed the price back down from its highs. This is a clear sign of rejection, even if the price briefly poked above resistance.

3. Check the Momentum: The RSI Divergence

The Relative Strength Index (RSI) is a momentum indicator. Sometimes, you'll see the price make a new high, but the RSI makes a lower high. This is called a "bearish divergence."

bearish divergence occurs when price makes a higher high while the RSI makes a lower high — a pattern often interpreted as a sign that momentum is fading, and that the uptrend may be losing steam. It's like a rocket running out of fuel—it might still coast upward for a bit, but it's about to fall back to Earth — Investopedia.

Your Game Plan: How to Trade Safely

So, what should you do?

Wait for the Close: Don't buy just because the price touched a level intraday. Wait for the daily or weekly candle to close confidently above the resistance.

Seek Confirmation: The safest strategy is to wait for a "retest." After the initial breakout, the price often pulls back to touch the old resistance level (which should now act as new support). If it holds there, that is a much stronger signal to enter.

The Bottom Line

Lykkers, patience is your most powerful tool against fakeouts. The fear of missing out (FOMO) is a trader's worst enemy. By waiting for volume confirmation, reading the candle wicks, and checking momentum, you can avoid the traps and only commit your capital to the moves with the highest probability of success.

Remember, in the markets, it's better to be a patient detective than an impulsive victim.

Happy and safe trading!