After the first detailed lesson about the most important patterns to find in the charts here comes the second lesson as promised. Today we’ll talk about Dr. Fakey
I like to call him doctor because is one of the most reliable patterns when found in the right spot (support/resistance, swing points, event areas etc…) and is not so difficult to find.
There are two kind of Fakey, the main one called Major Fakey and the Minor Fakey. As the name said the Major is the most important pattern to look at and I’ll show you why.
We talked about Inside Bars in our first lesson about price action patterns. Wise Price action traders always trade them in the direction of the trend but not all the traders do the same. Often a trader will put a limit order on the break of both the side of an inside bar that’s how the fakey will form and will make us feel like big boys in the market 🙂
As you can see the fakey is formed by at least 3 bars. Mother candle, Inside Bar, the fakey bar that act for a false breakout and than reverse the movement. A lot of amateurs will trade in the direction of the false break and get caught in the reversal movement, ending with a loss. Above we can see some Major Fakey and Below a Major Fakey reversal and a Minor Fakey. We have a Minor Fakey when the third bar broke the high/low of the inside bar instead of the mother candle and return in its range.
How to trade them
Now, how to trade them in the safe and aggressive way?
The conservative way to trade all the Fakey is to wait always for the break of the Mother Candle like we used to do for the Inside Bar Pattern, of course not in the direction of the false breakout 🙂 and set a SL on the opposite side of the Mother Candle or the high/low of the Fakey bar. As always conservative way means less stop loss but a more difficult risk:reward to be taken. Most of the people trade them differently.
The aggressive way to trade them is different except for the minor fakey where we must always wait for the breakout of the mother candle and treat them like an Inside Bar.
The Major Fakey instead give us the possibility to enter aggressively for example at 50% retrace of the pin fakey bar with the SL above or below its high/low.
As you can see in the second image this possibility is often given to use, the price retrace for 50% of the pin and than goes in the right direction.
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See you on Thursday for the last pattern lesson, Ms. Pin, the most popular pattern in the trading world 🙂