What is Fakey Candlestick Pattern? How to trade with Fakey candles

What is Fakey Candlestick Pattern? How to trade with Fakey candles

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The Fakey candlestick pattern is the most important and effective form of price action pattern. Therefore, if you want to be successful in Forex trading, investors need to know the characteristics, how to recognize and how to trade with this model.

What is the Fakey Pattern? 

Candlestick pattern Fakey also known with different names like bull trap, bear trap, model traps prices … As introduced, Fakey is one of the models candle-school trading Price action  (action price )

By definition, Fakey is simply a combination (setup price action) of an Inside Bar accompanied by a false breakout. A typical false breakout might be a Pin Bar like the example below:

What is the Fakey Pattern?
What is the Fakey Pattern?

Fakey’s structure includes: an Inside bar pattern (1 mother candle – Mother bar, 1 inner candle – Inside bar); an Inside bar breakout candle; a candlestick that reverses that breakout. After Fakey is formed, the market will move in the direction of the reversal candle.

Features of Fakey candles

– First, the market formed an Inside Bar candlestick pattern (first two candles). Then appeared the third candle showing the price seems to be going up. At this point, many traders think that the Inside Bar pattern has been triggered, so they will buy when the price moves out of the range of the pattern.

– However, after that, the price dropped sharply (fourth candle), forming a false inside bar (false-break out of Inside Bar) pattern. The result forms a Fakey model. After the Fakey pattern is formed, the price will plummet, this is a potential opportunity for traders to make big profits.

With a bullish Fakey pattern, the breakout candle must close above the top of the inner candle or the inside bar pattern itself.

In contrast to a bearish fakey pattern, the breakout candle must close below the low of the inner candle or the pattern itself.

The meaning of the Fakey candlestick pattern

To know the meaning of the Fakey candlestick pattern for investors in the trading process, you first need to understand the reason behind the formation of this candlestick pattern. Typically, the Fakey candlestick pattern can come from the following two main reasons:

Due to the impact of the big guys – “sharks”.

First, the big boys tricked the retail traders that the price went up according to the mechanism of the Inside Bar. Usually these traders will buy and place a stop loss just below the candlestick pattern. However, after that, the “sharks” executed huge BUY orders and wiped out the other traders’ stop loss. After eliminating most of the above investors, they will let the price move back to the trend of the Inside bar.

Obviously, this is a game created by the big guys. Therefore, if you are sensitive and reckless enough to detect this signal, you can “follow” them with a very high probability of success.

Note, the big guys usually only create Fakey model when the market trend is not strong, the trading volume is not much, so they can be easily manipulated.

The meaning of the Fakey candlestick pattern
The meaning of the Fakey candlestick pattern

Due to the market’s reaction to the arrival of an important news or event.

First, there will be the appearance of fake news or intentionally spreading fake news for profit. Waiting for traders to invest according to the news that bought all of them as planned, the fake news was immediately corrected in the opposite direction, causing the market to jerk and reverse direction, from which the Fakey pattern was formed. .

One of the typical examples of price action scams is the US Presidential election in 2000. Initially, most major US newspapers reported that Al Gore – Vice President would take control. administration of the White House, causing prices in the stock markets and foreign exchange markets to plunge in one direction. But then, all the newspapers published news that the candidate George W. Bush was the winner, causing the market to jerk in the opposite direction, forming the classic Fakey pattern.

=> From the above 2 causes of Fakey candlestick formation, false breakouts are a big signal in forex trading , they show traders what the sharks are thinking and preparing to do. If you are sharp enough to detect the market’s trick, this is a great opportunity for you to make a big profit.

Fakey candlestick patterns

Normally, the market will move in two trends, so the Fakey candlestick pattern also has two main forms: Bearish Fakey Pattern (bearish Fakey candlestick pattern) and Bullish Fakey pattern (bullish Fakey candlestick pattern). In addition, Fakey also has some other variations.

To learn more about the above pattern types, let’s follow each specific pattern below:

Fakey bearish candlestick pattern

A bearish fakey candlestick pattern appears when the price is fluctuating in an uptrend. Especially if the Fakey candlestick pattern forms in the resistance area, this is a very strong reversal signal and traders can enter a sell order to make a profit.

Fakey candlestick patterns
Fakey candlestick patterns

Bullish fakey candlestick pattern

In contrast to bearish Fakey, bullish Fakey occurs when the price is in a downtrend. When this pattern appears in the support zone, it is likely to reverse to the upside and traders can execute buy orders.

Bullish fakey candlestick pattern
Bullish fakey candlestick pattern

Variations of the Fakey pattern

Fakey Pattern with Pin Bar

A major variation of Fakey is the Pin Bar pattern. Accordingly, this pattern is different from the standard Fakey in that the two candles behind will be reduced to a Pin Bar candle.

The figure above depicts a Fakey pattern with a Pin bar in both bearish and bullish cases.

Fakey Pattern with Pin Bar
Fakey Pattern with Pin Bar

Another variation

This variation has the same shape as the Fakey pattern with Pin bar. The difference is that the candle behind is not a Pin bar candle; it has a long beard and a body that is 2 times longer than the Pin bar candle. However, both of these variations have one thing in common, which signals a false breakout of the Inside bar pattern and the market will pull back after that.

Another variation
Another variation

How to trade with Fakey candles

Trading method with Fakey candlestick pattern is not too complicated. Traders need a bit of sensitivity and proper adherence to market rules, then the possibility of success is entirely possible. Here are some steps when trading with Fakey that investors need to understand.

Step 1: Identify the market trend.

First, traders need to determine if the market is in an up/downtrend or in a sideways market phase . Next, identify key price areas that are likely to reverse such as resistance and support so that when a Fakey appears, you will have the opportunity to enter orders.

Step 2: Place a trading order.

In case the Fakey pattern is formed by a Pin bar candle, you can buy or sell at the price above the top of the pinbar candle and at least 2 pips away from this top .

Step 3: Set stop loss, take profit

– Stop Loss : Placed below the last candle to prevent the market from moving as expected.

If trading according to the weekly chart, investors should only place stop loss at least 100 pips from the low of the last candle.

For the daily timeframe is 50 pips.

Similar to H4 time frame is 30 pips

H1 frame is 20 pips

15p frame is 15 pips.

Set stop loss, take profit
Set stop loss, take profit

– Take profit : Regardless of any trading method, you should set profit taking according to the ratio R: R (risk: profit) of 1:2. That is, the distance from the entry point to the stop loss level (stop loss) must be 1/2 the distance from the entry point to the take profit level of the trade.

For example: To apply the Fakey pattern well to forex trading, let’s consider the Fakey forming in the support and resistance areas as follows:

Resistance and support levels are inherently a signal for a reversal. If the Fakey pattern is formed in these areas, the reversal signal will become more reliable. Especially when the price broke out of the resistance / support level but also bounced back, it proves that the signal is stronger.

The resistance/support lines can be horizontal, diagonal or a Fibonacci level , an MA ….

The Fakey pattern was formed right at the resistance area.

In the case of Fakey candlestick forming at the resistance area as shown. We will enter a SELL order at the resistance area (red arrow position).

The Fakey pattern was formed right at the resistance area.
The Fakey pattern was formed right at the resistance area.

Fakey pattern formed in the support zone

This is a case of Fakey that just formed at the beginning of an uptrend and appeared right at the support level. At this point, traders can place a BUY order at the lowest point of the candle (red arrow position as shown in the picture).

Fakey pattern formed in the support zone
Fakey pattern formed in the support zone

Conclude

In summary, by presenting the most accurate and general knowledge about the Fakey candlestick pattern , the article once again confirms the effective effect that Fakey brings to financial investors.

For price action traders in particular and the majority of investors in general, deep understanding and knowing how to apply the Fakey model to trading is extremely necessary, it is like a warning signal to help. Traders are not “trapped” by false reversals when entering the market.

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