Many traders struggle to distinguish between a break of structure and a liquidity sweep or fakeout. This post aims to clarify the difference, helping you identify false market structure shifts and stay on the right side of the trend.
Break of Structure:
- Occurs in the direction of the overall trend
- Involves a clear momentum-driven break of a structural point
- Price continues to trade above or below the broken point, depending on the trend direction
Liquidity Sweep/Fakeout:
- Typically occurs in the opposite direction of the overall trend
- Involves a brief break of structure, often with a quick reversal
- Price may only wick beyond the structural point or have a single candle close outside before returning inside
By understanding these differences, you'll be better equipped to navigate market fluctuations and make informed trading decisions.
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