Failed Breakouts: Why Price Fakes the Move Then Snaps Back Hard
Failed breakouts are one of the most common—and most painful—market traps. Price pushes through a support or resistance level, traders jump in expecting continuation, and then the market snaps back into the range and destroys everyone who chased.
Why Breakouts Fail So Often
Because the first breakout is usually just the market testing the level for liquidity, not committing to a real move. If you’ve read Liquidity Pools, you already know stops cluster above highs and below lows. Breakouts hit those stops first.
What a Failed Breakout Actually Looks Like
A typical failed breakout has three steps:
- price breaks the level
- volume spikes as stops trigger
- price immediately reverses in the opposite direction
| Phase | Behavior |
|---|---|
| Break | Price pokes above/below a major level |
| Trap | New breakout traders enter and get stuck |
| Reversal | Price surges back into the range |
Why the Market Fakes the Move
Failed breakouts happen because:
- the breakout wasn’t backed by real orderflow
- institutions used the level to fill positions
- volume was thin behind the breakout
- the market wanted the liquidity sitting behind the level
This ties directly into Stop Runs, since failed breakouts are basically controlled stop runs with no continuation.
How to Spot a Failed Breakout Before It Wrecks You
- the breakout candle has weak follow-through
- aggressive orders slow down immediately after the break
- price hesitates instead of accelerating
- pullback after the break is too deep
The Difference Between Real and Fake Breakouts
A real breakout shows:
- strong follow-through
- stacked volume
- shallow retests
A fake breakout shows:
- hesitation
- tired candles
- a fast snap back inside the range
How to Trade Failed Breakouts
1. Don’t Chase the First Break
The initial breakout is usually the worst entry.
2. Wait for the Trap to Spring
If price snaps back inside the range, the failed breakout is confirmed.
3. Trade Back Into the Range
The best play is almost always fading the failed breakout.
4. Combine With Structure
Failed breakouts near structural highs/lows (see Market Structure) are even more reliable.
The Bottom Line
Failed breakouts are part of the market’s natural liquidity process. If you recognize the signs early, you avoid getting trapped and start trading the reversal instead of being the liquidity that fuels it.