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Price Action

What Is a False Breakout

A false breakout is a close beyond a level that the next closes take back: the price finishes a period on the far side of the line and then returns to the near side. This paper shows you a real one drawn from four days, why the same close is a breakout on one path and a false one on another, the trap on the daily and the hourly chart, and the server clock that says when a candle has closed.

Difficulty
Beginner
Reading time
5 min
Pages
8
Reviewed by
Saman Rahbar

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The trap

A false breakout is a close beyond a level that the next closes take back. The euro against the dollar made a high of 1.18295 on 1 July 2025. On 16 September the day closed at 1.18667, 37 pips above it — a pip being the fourth decimal place, the smallest step most people count in — which is a breakout by the close. On 17 September the price reached 1.19189, then closed at 1.18121, back under the July high; 18 September closed lower still. The close that went through was taken back the next day.

Two roads over the same line

The first close over a level looks the same whether or not it lasts. What names it is what comes after. If the closes that follow stay beyond the line, it was a breakout. If the very next close is back on the old side, the same close over the line is called a false breakout — the price went through and did not stay. So the word cannot be said on the day of the break; it is said one or more closes later, looking back.

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