Trader Vic's false breakout method

Trader Vic's false breakout method

2023-01-27 • Updated

Tribute

Victor Sperandeo is a famous trader who suggested a methodology to identify trend reversal based on false breakouts. We will examine this methodology below and bring some examples to demonstrate its use.

Theory

The methodology suggests that you can take any trend (be it bullish or bearish) on any timeframe. Essentially, you will be looking for a spot where the price inches beyond a recently formed high or low. If it does so and then quickly reverses, it is taken as an indication that a larger correction is about to take place – that is what you will use to make your profit.

The inner logic behind this approach is the hypothesis that if the market does not have the momentum to beat a recently formed high or low and just inches beyond it, it is likely to go into correction against the trend it was in when it made that high or low. Here is how it works.

  1. You wait for a tactical high or low to be formed. To have that, you see that a 20-bar high/low appears.
  2. After that, you wait to see if the price steps back several bars, bouncing from that recently formed tactical high.
  3. Then, you check if the price gets back again into the trend it was in when it made the tactical high or low.
  4. Now, if the price just inches beyond that recently formed high or low and then bounces back again, that should be an indication for a bigger correction.
  5. You open your trade as soon as the reversal is confirmed.

1.png

Example 1: sell

  1. You see the new high formed in point A.
  2. You see a significant retracement down to point B.
  3. You see the price went up again reaching point A just a bit higher than point A.
  4. You see bar D reversing down and note its low.
  5. You see the price close below the low of bar D – you sell here aiming to close at point F.

2.png

Example 2: buy

  1. You see the new low formed in point A.
  2. You see a significant retracement up to point B.
  3. You see the price went down again reaching point C just a bit lower than point A.
  4. You see bar D reversing up and note its low high.
  5. You see the price close above the high bar D – you buy here aiming to close at point F.

3.png

LOG IN

Similar

Forex Trading Plan Example and Definition
Forex Trading Plan Example and Definition

Trading has several levels of complexity, starting from the easiest, like buying and selling random assets, to a more comprehensive one, with deliberate risk management, timing, and objectives.

Frequently asked questions

  • How to start trading?

    If you are 18+ years old, you can join FBS and begin your FX journey. To trade, you need a brokerage account and sufficient knowledge on how assets behave in the financial markets. Start with studying the basics with our free educational materials and creating an FBS account. You may want to test the environment with virtual money with a Demo account. Once you are ready, enter the real market and trade to succeed.

  • How to open an FBS account?

    Click the 'Open account' button on our website and proceed to the Trader Area. Before you can start trading, pass a profile verification. Confirm your email and phone number, get your ID verified. This procedure guarantees the safety of your funds and identity. Once you are done with all the checks, go to the preferred trading platform, and start trading.

  • How to withdraw the money you earned with FBS?

    The procedure is very straightforward. Go to the Withdrawal page on the website or the Finances section of the FBS Trader Area and access Withdrawal. You can get the earned money via the same payment system that you used for depositing. In case you funded the account via various methods, withdraw your profit via the same methods in the ratio according to the deposited sums.

Deposit with your local payment systems

Data collection notice

FBS maintains a record of your data to run this website. By pressing the “Accept” button, you agree to our Privacy policy.

Callback

A manager will call you shortly.

Change number

Your request is accepted.

A manager will call you shortly.

Next callback request for this phone number
will be available in

If you have an urgent issue please contact us via
Live chat

Internal error. Please try again later

Don’t waste your time – keep track of how NFP affects the US dollar and profit!

You are using an older version of your browser.

Update it to the latest version or try another one for a safer, more comfortable and productive trading experience.

Safari Chrome Firefox Opera