TradersClass

Non Farm Payroll, NFP days, are well known for surprises and violent whipsaws.

False break outs are either the bain of the Forex traders life or one of the best trading opportunities available. I go with the latter view, I'm seldom comfortable with breakouts as there is a very high probability of false breaks so I like to be on the look out for failing breakouts as the probability of a move against the previous trend is higher.

Trader Vic, Victor Sperendeo, detailed the 2B false break in his 1991 book 'Trader Vic, Methods of a Wall Street Master' Take a look at the picture below.

This is how to trade them, see the chart and desciption below....

1. Draw a horizontal line at the most immediate high (or low) that is followed by at least one corrective candle that didn't go higher (lower). 2. The candle that makes the next new break out high is marked up with a horizontal line at its lowest point (high). 3. If price now comes back, I want to be selling when the next candle moves lower. Manage the trade in the usual way with scaling out to ensure a profit doesn't become a loss.