What is a Fake-Out in Cryptocurrency Markets?

As a word, fake-out means to deceive. In cryptocurrency markets, it is used to predict that a price movement will occur and to express that the expected movement does not occur after a transaction is made accordingly. If you’re wondering what a fake-out is, then you will find the answer in this article.

First, what is technical analysis?

Technical analysis is a method used for all kinds of financial assets such as cryptocurrencies, stocks, currencies or commodities and is used to predict which direction the markets will move in the future based on historical price information. In technical analysis, changes in parameters such as price and volume of cryptocurrencies or items such as support and resistance points are determined and some predictions are made.

What is a fake-out in cryptocurrency markets?

Fake-out is a concept used to express that a trade is made with the expectation of a price movement that is expected to occur in the future, but the expected movement does not occur. The movement expected to occur on the chart is interpreted by investors as if it were to occur in the first place. However, this movement does not continue due to the sudden change in the graph.

How to detect a fake-out?

Investors resort to some methods to avoid fake-outs. Many methods used in technical analysis reduce the possibility of loss and ensure better interpretation of the chart. Accordingly, applying more than one method at the same time, rather than a single method, can reduce the risk of loss. For example, when using the candlestick method, not only this, but also considering factors such as interest rate policies and economic conditions in the world can reduce the risk of fake-outs.

Fake-out and retest

One of the methods used by investors to minimize the possibility of a fake-out is retest. Retest means that the price of a cryptocurrency asset breaks after it reaches support or resistance points, and after this break, the graph returns to the same points. The realization of the retest situation is also interpreted as the approval of a cryptocurrency asset. To minimize the possibility of a fake-out, retest is a method used by investors to confirm the value of the relevant cryptocurrency.