Fakeout

A fakeout is a market situation in which a movement or signal foreshadows a certain trend that will later be rejected or falsified

A fakeout can occur following a false breakout of a support or resistance level, which has convinced investors to sell or buy an asset respectively. In this case, the fakeout is a false breakout: the price only momentarily crosses the level, reversing almost immediately; this then causes financial losses or missed gains for those who do not recognise it. 

A fakeout can occur in any financial market, from forex to cryptocurrency. Fakeouts usually signal that the market trend does not have sufficient volume to consolidate or change.

Although they may share common characteristics, fakeouts should not be confused with Bull Traps and Bear Traps. 

Fakeouts generally indicate any disappointment of a trader’s expectations, not only bullish or bearish. Moreover, in fakeout situations, investors usually act in advance of price movements, before they occur, based on forecasts; on the other hand, during Bull Traps and Bear Traps, the change in trend is already in place and observable.   

There is no precise strategy for accurately recognising a fake out. Many investors, however, rely on technical analysis tools such as volume analysis, moving averages or oscillators to distinguish them from actual breakouts. 

Correlated words

Dividend

Profit received periodically in exchange for participation in the shares of a company

Diversification

The strategic inclusion of assets with different characteristics in the investment portfolio

Drawdown

Indicator that calculates the difference between the maximum and minimum price of an asset over a specific time period.

Floor price

The minimum price at which an asset can be purchased.

Bitcoin Dominance

The percentage ratio between Bitcoin's market cap and that of the entire crypto market.

Pair

Two currencies traded against each other on a crypto or forex exchange

Price action

The behaviour of the price of a financial instrument over time.

Relative Strength

A chart describing the performance of a pair of cryptocurrencies by comparing their price performance.

Breakout

In a price chart, the breaking of a resistance or support leading to an increase in volatility and trading volumes.

Bull Run

Market phase characterised by a bullish trend, associated with positive investor sentiment.

Rally

A sudden and rapid rise in the price of an asset or market index, caused by increased demand from investors.

Market Mover

A factor capable of influencing the development of a market and the level of prices.

Mutual Funds

Mutual funds are financial instruments that combine the capital of several investors into a single asset.

Bear Trap

In a bullish market, a Bear Trap is a downward price movement that can confuse investors.

Bull Trap

In a bearish market, a bull trap is an upward price movement that, like a trap, can be deceptive.

Volatility

In economics, volatility indicates the variation of the price of a financial instrument through time.

Supply and demand

In economics, supply and demand correspond to the two main market variables and describe the behaviour of those who buy and sell goods or services.

Volume

The amount of currency traded in a given period.

Market Trend

A perceived tendency of financial markets to move in a particular direction over time.

Trading

Trading is a speculative activity of buying and selling financial assets, with the goal of making a profit.

Stop Order

A trading order that allows you to set a price at which another order is triggered.

Slippage

The difference between the execution price of an order and the price entered in the order.

Support and resistance

Support and resistance are two technical analysis tools used to monitor the price trend of an asset.

ROI

A value that measures the return generated by an investment.

Pump&Dump

A strategy that inflates the price of a cryptocurrency to generate profits only for those who implement it.

Prediction Market

Exchange-traded markets created for the purpose of trading the outcome of events.

Order Book

The list of all the prices at which traders are willing to trade a certain amount of cryptocurrency on an exchange.

Oracle

A service that collects data not available on blockchain, verifies it and provides it to smart contracts

Moon

When the price of a cryptocurrency rises very fast, they say it soars 'to the moon'.

Market Order

Instant buy or sell at the next best price available on the market.

Market Maker

Companies or organised entities that, in partnership with an exchange, are always willing to buy and sell a cryptocurrency.

Market Cap

The total value of all the coins or tokens of a cryptocurrency in circulation.

Limit Order

A buy or sell order that is executed only when the cryptocurrency reaches the set price.

Futures Contract

A contract that regulates the execution of a transaction at a predetermined price on a specific date.

FUD

Fear, Uncertainty and Doubt refers to a negative market sentiment

Circulating Supply

The number of units of a cryptocurrency available on the market.

Forex

The Foreign Exchange Market allows fiat currency trading.

FOMO

Fear Of Missing Out is an expression often used in the context of trading and cryptocurrencies.

ETF

ETFs are passively managed investment funds that replicate the value of a reference index called a benchmark.

Buy Wall and Sell Wall

High number of purchases or sales demanded at a certain price.

Bull Market

A market where there is an upward price trend

Break-Even point

The balance point between losses and gains, income and expenditure.

Bid and Ask

In the order book, these are the prices at which an asset is offered or demanded.

Benchmark

A standard for measuring the performance of a financial instrument or market.

Bear Market

A market phase characterised by price lows.

ATH and ATL

Acronyms used to indicate the maximum and minimum price of a cryptocurrency.

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