Trading with fake signals after inside the bar

The pattern of false signals is bearish and bullish

There are 2 kinds of false signal patterns, which consist of 2 bars or which only consist of a pin bar which shows a false breakout bar. A pattern consisting of 2 bars shows the first bar that broke the highest level or the lowest mother bar and the second bar moves in the opposite direction to the first bar, so that the two bars show a false breakout pattern. The following pattern of false breakout is bearish (1) and false breakout is bullish (2):

A pattern consisting of a pin bar indicates price movements that reverse after breaking through the highest level or the lowest level of the mother bar to form a false breakout pin bar or reversal pin bar. The following is a false breakout pattern with a bearish reversal pin bar (3) and bullish reversal pin bar (4):

Usually a false breakout pattern that consists of 2 bars or a pin bar will continue the reversal movement with a strong trend. In addition there are also fake signal patterns which consist of 3 bars, but are rare.

Trade with fake signal patterns

The pattern of false signals due to false breakouts can occur in market conditions that are trending or sideways (ranging), and usually the probability of success is quite high.

Here is an example of a pattern of false signals in a trending market where prices move uptrend before consolidating and moving sideways with a clear support level. There appears a false signal pattern consisting of 2 bars, namely a false pattern of bullish breakout:

Entry buy can be done after a false breakout at the support level, with stop loss at the lowest level of false breakout bar. In this example the supporting factors are the false breakout bar rejection (support). To determine the more accurate entry momentum, an indicator can be used as confirmation.

The next example is a pattern of false signals on the market that are sideways (ranging) where prices move within a clear trading range, namely key resistance levels and key support levels.

A false signal pattern occurs at the key resistance where after the highest level of the mother bar is broken, the price immediately moves towards the opposite to penetrate the lowest level of the mother bar. Although the false breakout bar formation cannot be classified as a pin bar because its body is relatively not short enough compared to its tail, but still valid as a bearish reversal bar, what more after breaking the lowest level of the mother bar.

In practice sometimes the fake signal pattern does not only consist of an inside bar, but can be 2 or 3 inside the bar or maybe more. Inside bar shows the state of consolidation before market participants determine the direction of the next price movement. Consolidation can be short or long. Here is an example of a fake signal pattern with 2 inside bars:

A false breakout pin bar appears or a pin bar reversal after 2 inside bars, followed by a bullish bar. In this example the supporting factor is the rejection false breakout bar by the support level, and the entry buy can be done on the bar after the reversal of the pin bar.