Intraday Breakouts & Fakeouts

Introduction
If you’ve been trading for any length of time, you've probably heard of the term “breakout”. It sounds exciting—and it is. A breakout can be the start of a big move and massive profits. But what’s less talked about (yet very common) is the “fakeout”—a breakout that doesn’t hold and traps traders on the wrong side.

In the world of intraday trading, understanding breakouts and fakeouts is critical. Many traders lose money not because they don’t spot the breakout, but because they get caught in fakeouts. In this guide, we’re going to deeply understand what breakouts are, how fakeouts trick traders, and how you can trade both effectively.

Let’s dive in.

Part 1: What is a Breakout in Intraday Trading?
In simple words, a breakout happens when the price of a stock or asset moves outside a defined support or resistance level with increased volume.

Imagine the price is stuck between ₹100 (support) and ₹110 (resistance). It keeps bouncing in this range for hours. If suddenly, the price jumps above ₹110, that’s a breakout to the upside. If it drops below ₹100, that’s a breakdown (downward breakout).

Types of Breakouts
Price Breakout

Breaks key support/resistance levels.

Can happen on charts like 5-min, 15-min, or hourly.

Example: Nifty breaking above the day’s high at 10:30 AM with a strong green candle.

Volume Breakout

Price breaks with strong volume. Volume confirms that the breakout is real.

No volume = high risk of fakeout.

Time-Based Breakout

Usually happens during market opening (9:15-10:00 AM) or after lunch session (1:30-2:30 PM).

Institutions are active during these times.

Why Do Breakouts Happen?
A breakout indicates fresh buying or selling interest.

It reflects market consensus that price is ready to move beyond its old limits.

Often driven by news, earnings, or technical pressure (like stop-loss hunting).

Part 2: What is a Fakeout?
A fakeout (fake breakout) occurs when:

Price appears to break a level.

Traders jump in expecting a big move.

But price immediately reverses and traps them.

Fakeouts are deliberate traps—usually set by big players (institutions, smart money) to grab liquidity.
Retail traders often become the liquidity providers for institutions.

Why Do Fakeouts Happen?
Institutions want to fill large orders.

They push prices above resistance to trigger buy orders and stop-losses of short sellers.

Then they reverse the move, causing panic.

End result: Retail traders are left holding losses.

Part 3: Intraday Breakout Trading Strategies
Let’s look at some practical breakout strategies for intraday traders.

1. Opening Range Breakout (ORB)
Define the first 15–30 minutes range after market opens.

Place buy order above the high and sell order below the low.

Wait for confirmation candle and volume spike.

Common in indices like Nifty, Bank Nifty.

Tip: Always avoid trading in sideways markets using ORB. Use it when there’s strong news or momentum.

2. Flag or Pennant Breakout
Price consolidates in a tight flag or triangle after a sharp move.

Breakout of the pattern gives second entry into the trend.

Ideal for stocks showing momentum (e.g., high volume gainers).

3. Break and Retest Strategy
Wait for price to break a level.

Let it come back and retest the breakout point.

If retest holds and reverses in the breakout direction → enter.

Safer than blind breakout entries.

4. Trendline or Channel Breakout
Draw intraday trendlines on 5-min or 15-min chart.

Break of the trendline with good volume = possible entry.

Works well when the price breaks a descending or ascending channel.

Part 4: How to Avoid Fakeouts
Let’s be honest—you can’t avoid fakeouts 100%. But you can reduce them by being smart:

✅ Wait for Confirmation
Don’t enter on the first candle.

Wait for a closing candle above/below the breakout zone.

✅ Use Volume
No volume = No trade.

Use volume bars to check if breakout is real.

✅ Check Higher Time Frame
If 5-min shows breakout, check 15-min or hourly chart.

Are those timeframes supporting the move?

✅ Avoid Trading in Newsless/Sideways Markets
Breakouts in a consolidating or low-volume market are usually traps.

✅ Don’t Chase Breakouts
If price already moved too far from level, skip it.

Chasing leads to bad entries and panic exits.

Part 5: Stop Loss & Risk Management
Even the best setups fail. So risk management is king.

🔹 Where to Place Stop Loss?
Just below breakout candle (for long).

Just above breakdown candle (for short).

Or below the last swing low/high.

Example:
If a stock breaks out at ₹210 and breakout candle low is ₹205, place SL at ₹204.50.

🔹 How Much to Risk?
Risk only 1–2% of your total capital per trade.

Never add to a losing breakout trade.

Use position sizing wisely.

Part 6: Mindset – Stay Neutral, Not Emotional
Fakeouts hurt more mentally than financially.

After 2–3 fakeouts, you may start doubting every breakout.

The key is to follow a process, not feelings.

Keep notes of what works and what doesn’t. Learn from each setup.

Part 7: Bonus – Common Breakout Traps
Breakout Without Volume

Looks tempting, but lacks power.

Almost always fails.

Midday Breakout in Low Volatility

Low chance of success unless news-driven.

Breakouts Near Big Events (like Fed meetings, RBI policy)

Markets often reverse after whipsawing.

Extended Breakouts (after 4-5 green candles in a row)

Usually too late to enter.

Conclusion
Trading intraday breakouts and avoiding fakeouts is both art and science.
Yes, it’s risky. Yes, it’s fast. But with the right knowledge, experience, and discipline, you can turn it into a powerful edge.

To succeed:

Focus on volume, price action, and context.

Have patience to wait for the right setup.

And most importantly, protect your capital using risk management.

Breakouts can give you explosive gains—but only if you avoid the traps that come with them. So stay sharp, stay calm, and trade with a plan.