---
title: 'How to Trade Fakeouts (Avoid The Trap)'
source: 'https://youtube.com/watch?v=foHZY8vM5ss'
video_id: 'foHZY8vM5ss'
date: 2026-08-19
duration_sec: 71
channel: 'TradingLab'
---

# How to Trade Fakeouts (Avoid The Trap)

> Source: [How to Trade Fakeouts (Avoid The Trap)](https://youtube.com/watch?v=foHZY8vM5ss)

## Summary

The video explains a common trading mistake: entering a trade immediately after a bullish breakout without considering the risk-reward ratio. It demonstrates a better approach using a retracement to a Fibonacci level for a more favorable entry.

### Key Points

- **The Wrong Choice** [00:02] — The video starts by stating that picking the immediate breakout is wrong if you want the chart to go up; it should go down first.
- **The Correct Setup** [00:15] — To go up, price should break a low first, with a candle wicking below the low but closing above it, then immediately move up to break the previous high and close above it.
- **The Common Mistake** [00:28] — Most traders enter a long trade at the breakout point, which looks bullish but is a mistake due to poor stop-loss placement and bad risk-reward.
- **The Better Strategy** [00:54] — Instead, wait for price to retrace, use a Fibonacci level for entry, which improves risk-reward and increases profitability odds.

### Conclusion

The key takeaway is to avoid entering at the breakout and instead wait for a retracement to a Fibonacci level for a better risk-reward ratio and higher profitability odds.

## Transcript

If you pick this one, you're wrong. You see, if you want the chart to go up, you actually want it to go down first. If you want the chart to go down, it must go up first. Here's what I mean. If you want the chart to go up, look for price
to break a low first. While doing this break, the candle should wick beneath the low, but close above it, just like it did here. After doing so, it should immediately start heading in the other direction, breaking the previous high.
But this time on the break, it should close above it. But this exact point is where I see the majority of traders make the mistake. Sure, this formation looks bullish, and you may even enter a long trade here, but this is one of the worst
mistakes you can possibly make. Because where are you going to place your stop loss? Sure, you could place it here, down below this low, but then your risk-reward is insanely bad. And if you do get a losing trade, you are going to
do get a losing trade, you are going to take a big hit. Instead, wait for price to retrace back down, use a Fibonacci level for your entry, enter the trade down here. Now, you have a way better risk-reward, [music] and your odds of
being more profitable have just raised significantly.