Let me break down the fakeout entry technique — what it means, why it works, and how you can start using it to get better entries in volatile markets.
What Is the Fakeout Entry Technique?
The fakeout entry technique is effectively buying — or looking for your entry — where your stop loss would normally be.
What that means is you wait for your original stop loss to get triggered. Then, once price action pulls back above that price, you look for your entry. In other words, you see a fakeout below your stop loss price, and that becomes your signal.
This technique can be really valuable and very profitable during periods of high market volatility or even indecisive markets, because it creates a liquidity trap and allows us to get what I call "fakeout insurance."
Here's the key insight: it's pretty rare that a setup will fake out twice before making a move. Generally, it will fake out once. So if we wait for that initial fakeout and then enter, we have the correct thesis with a much more precise entry point.
The Two Stop Loss Locations
To use this technique, you first need to understand the two primary stop loss techniques in the DTR method:
- Stop loss at the low (or high) of your confirmation candle
- Stop loss at the low (or high) of your entry candle
The fakeout entry technique works with both.
How It Works: Step by Step
Let's say you're looking for a bearish reversal using the aggressive entry technique. You've identified a confirmation candle and your stop loss would be at, say, 25,095.50.
Instead of entering immediately, you:
- Note the stop loss location — this is now your trigger zone
- Wait for price to make a high above that level — this is the fakeout
- Watch for price action to pull back under 25,095.50 — this is your entry trigger
You're watching bulls fail in their attempt to reclaim control. You know they're failing because they've pulled back to where you anticipated support to be. That gives you a clear entry with a much tighter stop.
The result? A clean breakdown for the remainder of the session with a lot of room to run.
Why It Works: The Liquidity Trap
When price pierces through a stop loss level, it triggers all the stops sitting at that price. This creates a burst of liquidity — all those stop-loss orders getting filled. The market makers and institutional players know these levels exist.
The fakeout happens when there isn't enough genuine momentum to continue through the level. Price pierces through, collects the stops, and then reverses. If you're waiting for exactly this to happen before entering, you're:
- Getting a better entry price than you would have otherwise
- Getting fakeout insurance — the stops have already been collected
- Trading with higher conviction — the failed move confirms your direction
Applying It to Bullish Setups
Same concept works in reverse. If your stop loss for a long trade would be below a certain level:
- Wait for price to briefly break below that level (the fakeout)
- Watch for price to reclaim above that level
- Enter long once the fakeout has been confirmed
Your new stop loss becomes the low of your entry candle after the fakeout — which is typically below where the original stop would have been, giving you even better risk-reward.
The Key Rule: No Double Fakeouts
In my experience, the market will generally fake out once before making a move. A double fakeout — where it fakes out twice before going — is much rarer. This is what gives the technique its edge.
If you see a level get faked out once and then price reclaims, you can enter with reasonable confidence that the move is genuine. If it somehow fakes out a second time, that's valuable information too — it tells you the setup might not be as strong as you thought.
When to Use It
This technique is most effective during:
- High volatility sessions — more fakeouts happen when the market is choppy
- Indecisive markets — when the market is bouncing around a level without committing
- Major support/resistance levels — where you know stop losses are clustered
It's less useful during clean trend days where breakouts happen with authority and don't look back.
Nothing Changes About Your Process
Here's the beautiful part — nothing fundamentally changes about your setup process. You still:
- Identify your confirmation candle
- Determine your stop loss location
- Calculate your position sizing
The only difference is that instead of entering immediately, you wait for the fakeout at your stop loss level and then enter once price reclaims. Same framework, same risk management, just with a better entry and higher probability.
Ready to Master Advanced Entry Techniques?
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