The Fakey Forex Trading Strategy is a trading technique that is based on the fakey pattern. It is a forex trading method that can be used to trade false breakouts on the charts, particularly in regions of support and resistance. When trading Forex, the Fakey Pattern may be one of the significant trading signals to comprehend. It assists us in determining whether the “major players” have effectively engaged the “trap,” providing us an indication of the possible upcoming price behavior.
What is the Fakey Pattern?
The Fakey pattern is best described as a “false-breakout from an inner bar pattern”. The Fakey pattern is always preceded by an inside bar pattern. A fakey pattern occurs when price initially breaks out from an inside bar pattern but then soon reverses, causing a false-break, and closes back within the range of the mother bar or inside bar. A pin bar may or may not be used as the false-break bar in a Fakey pattern. The false-break bar can also be a two-bar pattern, with the first bar closing beyond the range of the inside bar and (or) mother bar, and the second bar completing the false-break by closing back inside the range of the mother bar and (or) inside bar.
The Fakey Patterns are an important price action trading approach because they can assist us discover stop-hunting by the ‘big boys’ and give us a decent idea of what price might do next.
Fakey Trading Strategy
The trading method using Fakey is not difficult although traders ought to be sensitive and disciplined. Traders ought to first evaluate whether the market is in an up/down trend or a sideways market phase. Next is to identify key price regions that are likely to reverse, such as resistance and support, so that they may enter orders when a Fakey occurs. If the Fakey pattern is formed by a pin bar candlestick, the trader could buy or sell at the price above the pin bar’s top or they could wait for the price to break out of the Mother bar. When the price breaks through the top or bottom of the Mother Bar candle in a Fakey pattern with False Breakout, the trader could place an order.
Buy Signal
This could be your checklist for a buy trade:
- When a bullish fakey pattern forms.
Once this event occurs:
- You could place a pending buy stop order at least 1-2 pips above the high of the third bar in a regular fakey pattern. If the pattern is a version of the fakey, you could place a pending order 1-2 pips above the high of the fourth bar in the pattern.
- You could set your stop loss just below the nearest swing low.
- You could set your take profit at the nearest resistance zone, or you could exit trade when a bearish fakey pattern forms.
- For good risk management, I would only consider trades with a risk to reward ratio of at least 1:2.
Sell Signal
This could be your checklist for a sell trade:
- When a bearish fakey pattern forms.
Once this event occurs:
- You could place a pending sell stop order at least 1-2 pips below the low of the third bar in a regular fakey pattern. If the pattern is a version of the fakey, you could place a pending order 1-2 pips below the low of the fourth bar in the pattern.
- You could set your stop loss just above the nearest swing high.
- You could set your take profit at the nearest support zone, or you could exit trade when a bullish fakey pattern forms.
- For good risk management, I would only consider trades with a risk to reward ratio of at least 1:2.
Fakey Trading Strategy Pros & Cons
Pros
- Because this is a naked price action trading approach, there will be less clutter on your chart.
- The fakey trading strategy has the ability to allow you to sell at the very peak and buy at the very bottom, allowing you to enter at the very beginning when the trend begins to change.
Cons
- It can be difficult for beginner forex traders to understand at first.
- There are ideal fakeys and fakey variations, and the fakey variations can be difficult to recognize if you don’t know what to look for.
Conclusion
The Fakey candlestick pattern is a nice tool for technical analysis which traders of all levels of experience would find useful. It is useful for price action traders in particular, and investors in general, to comprehend and utilize the Fakey pattern to trading. It functions as a warning signal, preventing traders from being “caught” by false market reversals.
The Fakey Trading Strategy is not the forex holy grail; as with all other forex trading systems, there will be false price moves and trading losses.
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