Crystal Pass · Camp 2 · Mirror Cave
False breakout
The walls of the second gallery are covered in crystal. Light seeping in from outside breaks on every surface and shows dozens of false exits. On a chart, too, not every breakout is a door. Some are traps.
The camp's rules
- 01
False breakout: price closes on the far side of the level but can't hold there, and a few candles later it comes back.
- 02
The trap's signature is the reclaim: price closing back on the old side of the level.
- 03
Stalling is a warning: a real breakout runs, while a trap gets stuck just past the level.
- 04
Bull trap: a breakout above resistance gets reclaimed. The stops of those who bought the breakout fuel the drop.
- 05
Bear trap: a break below support gets reclaimed. The sellers' stops fuel the rally.
- 06
Three questions: Did it close on the far side? Did it run, or stall? Was it reclaimed, or did it hold on the retest?
Teaching
The reclaim
A false breakout happens in three steps. One: price closes on the far side of the level.
Two: it lingers there for a few candles but can't move on.
Three: it returns to the old side of the level and closes there. This third step is the trap's signature: the reclaim. Everything the breakout gained has been wiped out.
Billur · Pass guide
Stalling is a warning
After a real breakout, price runs: the candles move away from the level.
In a trap, price gets stuck just past the level: small bodies, and wicks stretching in the direction of the breakout.
Stalling alone isn't a reason to trade. But it's warning enough not to jump on the breakout.
Billur · Pass guide
Who's in the trap?
When resistance breaks, buy orders come from two places: traders who were waiting for the breakout, and the stops of those who sold at resistance.
A seller who got stopped out is already out of the trade. The ones still in are those who bought the breakout: when price drops back below the level, they're losing, and their stops wait just under the broken level.
Each of those stops is a sell order. As price falls, they get triggered and speed up the drop: the trapped buyers become fuel for the fall.
Billur · Pass guide
The other side of the mirror
A bear trap is the mirror image of a bull trap: support breaks (1), sellers jump in but price stalls below it (2), then it closes back above the level (3).
This time it's sellers in the trap. Their stops sit just above the level, and each one is a buy order.
As price rises, those stops get triggered: the trapped sellers become fuel for the rally.
Billur · Pass guide
Trap or breakout?
Three questions tell them apart.
One: did the candle close on the far side of the level? If not, there's no breakout.
Two: after the close, did it run or stall? If it's stalling, don't jump in.
Three: did it come back and close on the old side? If so, it's a trap. If it came back and held at the level, it's a real breakout.
Billur · Pass guide
Lessons · 5
- Story
The cave of mirrors
Breaking light and a glow that looks like a way out: meet the false breakout.
- Lesson
The breakout that doesn't hold
Catch the moment a breakout gets reclaimed.
- Lesson
Bull trap
See how the stops of trapped buyers feed the drop.
- Lesson
Bear trap
Read a downside break that gets reclaimed, and tell a trap from a real breakout.
- Exam
Mirror Cave exam
Tell real breakouts from traps: six realistic charts.
Test yourself
What is the last step of a false breakout?
- ✓ Price closing back on the old side of the level
- · Price closing on the far side of the level
- · Price lingering past the level on small candles
Calling a breakout false before you see the reclaim is guessing. Calling it after is reading.
In a bull trap, who speeds up the drop?
- ✓ The stops of those who bought the breakout and are now losing
- · Only new sellers
- · No one; price falls on its own
The stop on a buy trade is a sell order. As price falls back below the level, those stops trigger one after another and feed the drop.