Fake Breakout

The Fake Breakout indicator identifies false breakout scenarios on previous day highs/lows or pivot points to signal potential trend reversals.

Usage

The Usage section explains how to identify fake breakouts using this tool. A fake breakout occurs when the price moves beyond a significant level but fails to sustain that momentum, quickly returning inside the previous range.

• Bullish Fake Breakout (Buy): This occurs when the price drops below the previous day low or a pivot low, but then crosses back above it within a specified number of candles. This suggests a "stop run" or lack of bearish conviction.
• Bearish Fake Breakout (Sell): This occurs when the price rises above the previous day high or a pivot high, but then crosses back below it within the lookback period. This indicates an exhausted move or a "bull trap."

Details

The script tracks the previous day's high (PDH) and low (PDL) using security requests or calculates pivot points based on user-defined left and right bar counts. It monitors how many bars have passed since the initial breakout. If the price returns to the opposite side of the level within the Lookback Previous Candle Breakout threshold, a signal is triggered. This logic helps traders filter for high-probability mean-reversion entries by focusing on failed volatility expansions.

Settings

Breakout Set

• Choose Fake Breakout Of: Determines the reference level used for detection. Options include "prev day h/l" (Previous Day High/Low) or "Pivot" (Swing High/Low).

Lookback Set

• Lookback Previous Candle Breakout: Sets the maximum number of candles allowed between the initial breakout and the return inside the level for a signal to be valid (typically 1-5).

Pivot H/L Set

• leftBars: The number of bars to the left required to confirm a pivot point.
• rightBars: The number of bars to the right required to confirm a pivot point.

FAQ

How do I use the lookback setting?

The lookback setting defines the "speed" of the fake breakout. A lower value requires the price to reject the level almost immediately, while a higher value allows for a more extended period of consolidation outside the level before the failure occurs.

Can I use this on any timeframe?

Yes, the indicator can be applied to any timeframe. However, when using the "prev day h/l" mode, it is most effective on intraday timeframes (e.g., 5m, 15m, 1h) where daily levels are significant.

How can I access the Fake Breakout indicator?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.