What is a False Break?

A false break is a sudden reversal in the market. It is the result of a herd mentality among traders. It can be described as a sudden drop as people think, “Oh, no, it’s too high, it won’t go higher, so sell!” Then the market continues higher, after the false break, as people continue to buy and drive the price higher. The same thing can occur on a down trend. The price is trending down. Then there is a sudden spike, as some misguided traders jump in to buy what looks like a good deal. Then the realization sinks in that the stock is, indeed, overvalued. Then the price continues to decline.

What is False Break Trading Strategy?

The false break trading strategy is also called contrarian Forex trading. Traders tend to start buying on an upswing and sell on a downswing. Amateur traders pile in to buy near the peak of the market or trading day, buying high and stuck only able to sell low in the future. Furthermore, amateurs tend to wait until an uptrend has progressed for a while, after much of the profit potential has been lost. If you use the false break trading method, you’ll avoid these emotional trades and make money off of the irrational actions of others.

There are different types of false breaks. The classic trap and false-break of consolidation are two of the most common forms of false breaks.

There are classic bull traps and classic bear traps. Bull traps occur in a bull market trend. Bear traps occur in a bear market trend. What they share in common is a one to four bar pattern. Both classic bear and bull breaks occur after massive moves in one direction as the trend approaches key levels or its median level. During a bull market trend, the prices are trending up. Amateurs sell on the up trend, not realizing that based on numerical analysis that it will likely go higher.

They sell, and you can buy the investments relatively low. Or simply wait with your holdings. Then the price continues its trend up again. And you can sell at a higher profit. The opposite set of conditions are a bear trap. The price looks like it is hitting a new low, but in reality, it is about to start rising again. This is a good time to buy at a great price, but those who sell out of fear of greater losses have only locked in their losses.

Another type of false break investment is the false-break of consolidation. These are one of the most common types of false breaks. It looks like the stock is about to break out of its normal trading range. People act expecting the stock is going to break its normal ranges. While this does happen, it is generally only the result of dramatic news. Imagine a billion dollar lawsuit that is not only filed but which was upheld on appeal. Or a mining company hit a rich vein of ore or found oil on a lease it already has the infrastructure to exploit. Unless there has been recent news that seriously changes the underlying financial fundamentals of the company, it is going to stay inside of its trading range. The financial trades made on the assumption that the investment is going to break those trading ranges are called the false-break of consolidation.

Multiple false breaks can indicate long term shifts in a trading range. Repeated false breaks near an upper trading range may mean that the stock’s valuation is going to start creeping upward over time. Repeated false breaks at the lower trading range are harbingers that it is declining in value. However, absent a radical reason to change, like the revelation of Enron’s books being cooked or one massive bad bet by JP Morgan that cost it two billion dollars, the market shifts are going to be modest.

–About the Author

David Connor is a professional Forex and futures trader who also acts as a tutor and mentor to many aspiring traders to learn Forex trading. David teaches a Forex Price Action trading method and has a real knack for helping traders become consistently profitable.


This guest post is courtesy of the Top Forex News team at Thanks for reading!

While successful forex traders are well-educated with respect to the markets, the best forex traders also exhibit certain personality traits that help their craft. That said, what personality characteristics should you have to become the best forex trader you can possibly be? Keep on reading to learn about the specific personality traits you should exhibit to be profitable in this type of endeavor.

Top Forex Trading Personality Trait #1 – Self-Discipline

Without a doubt, when it comes to trading on the forex markets, it is extremely important to implement your own forex trade rules when it comes to buying and selling – and to adhere to these rules at all times. If you do not abide by your self-imposed rules, disaster can strike at any time since the forex market is so volatile. Along similar lines, you should definitely keep your pride in check when you are making any types of forex trades. After all, it is all too easy to become overconfident when you are doing well with your trades. Always remember that one poorly made decision on your part can have a significant detrimental effect on your financial well-being. Consequently, it is definitely imperative to exercise discipline when you are trading on the forex markets.

Top Forex Trading Personality Trait #2 – Courage

While it is extremely important to exhibit self-discipline when you are trading on the forex market, it is also vital to exhibit courage when you are making forex trades. Why? Well, when it comes to forex trading, in many cases, you are dealing with a substantial amount of money when you are making trades. Consequently, after calculating the risk of a certain trade, you should not second guess your trading decisions. If you do so, you will begin to lose confidence in your forex trading abilities altogether. In turn, due to your faltering confidence levels, you may then make some poor decisions. While it is a given that you will not make money on each and every trade, it is vital that approach each forex trade with both confidence and courage.

Top Forex Trading Personality Trait #3 – Patience

Of course, exhibiting the virtue of patience is another personality trait that only the most successful forex traders possess. For instance, when you hear a tip regarding the forex market, it is important to be patient and carefully research the opportunity before you make any major decision about buying or selling currency. Remember that successful traders often find that it is a better decision to wait rather than to make a decision in haste and lose a substantial amount of money in the process. As the old saying goes, “Patience is a virtue”.

Overall, while it is extremely important that you conduct the proper research and keep informed with of current events that may affect the forex markets, to be the best forex trader possible you should exhibit certain key personality characteristics. Moreover, discipline, courage, and patience are the most important traits that you can exhibit when it comes to making lucrative forex market trades.


Investing is an activity that can provide income for you later in life. While it does take time, usually, to see the return on your original investment, you generally can watch your money work and make more money even while you sleep. The world of investing isn’t the simplest realm to break into, however, as there are many parts and aspects that you will have to learn first. There are some tools out there to help you, such as a Forex trading course or other software. In the end, it is important to remember that know-how is power, and walking into any investment without full understanding is dangerous for your money.

That is why it is so vitally important for you to learn about your chosen investment and find out the best practices and things to avoid. You can also seek out professional help, but beware, there are plenty of sharks in the financial sea; all of them out to get you and your money. Thus, fill your head with knowledge first before you take the proverbial plunge. That way, you can save money and get on the path to success without heartache or learning things the hard way.

Hiring a Broker

Getting help is probably the best way to go about investing, but you need to be careful. There are plenty of brokers and forex traders that can take advantage of you and  your money. Be sure that you research the company or person that you want to use to make sure they are legitimate and not just a fly-by-night company out to scam people. Look online to find reviews or ask people that you know. There are plenty of financial based forums out there full of information and recommendations when it comes time to choose a broker or investment help.

Forex Training Courses

While not all avenues of investing have training courses or investment tracking software, the segment known as Forex, or foreign exchange markets, do have training available known as a Forex trading course. There are tons of different forex training courses out there, and you will have to choose only one or two in order to learn what you need to learn to be successful at this aspect of investing. Remember, there are plenty to choose from, so don’t go spending tons of your own money to purchase a course until you are sure that it is a good course to purchase. Again, look online for reviews and ask people you know that might have already purchased a course. They will be able to point you towards a good choice or away from a bad one.


The internet is one of the best resources that you will have regardless of what avenue of investing that you choose to enter. While Forex trading is one of the most popular these days, there are plenty of other choices out there. While it may seem overwhelming at the beginning, breaking into the financial world of investing is not going to be hard. Remember these simple facts and you will find that the path to investing success is not that far off.