A term used in Technical Analysis, a fakeout is a term used to refer to a false breakout. What this means is that the price breaks out of a technical price structure, only it is set to reverse eventually.
It is highly possible that a fakeout can amount to a notable loss. Patterns may be identified through Technical Analysis should it fit the analyst’s strategy and inevitably play out the way he or she had presupposed. The price would still be subject to a reverse quickly because of outside forces, resulting into huge losses. As this is the case, to weather possible fakeouts, a majority of traders immediately plan their exit strategy and place stop-loss orders beforehand upon entering trades. This is actually an already proven strategy for basic Risk Strategy.