25/11/2025
📘 Lesson: Understanding the Main Types of Breakouts
(Market Structure • Liquidity • Smart Money Concepts)
Breakouts are one of the most misunderstood concepts in trading.
Most traders chase them… smart traders read them.
Below are the four main types of breakouts your visual represents — and how to trade each with confidence.
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1️⃣ True Breakout (Continuation Break)
A true breakout happens when price breaks a key level with real intention — backed by volume, momentum, and structural alignment.
How to spot it:
Strong impulsive candles
No immediate rejection wicks
Breaks structure cleanly and continues
Retest is shallow or skipped entirely
Smart Money Perspective:
This is when institutional flow simply continues the trend — no liquidity games.
Best trade:
Enter on the momentum or tiny pullback into structure.
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2️⃣ Liquidity Grab Breakout (Fakeout / Manipulation)
This is the breakout designed to trap retail traders sitting above/below key levels.
How it works:
Price breaks out aggressively
Quickly reverses back into the range
Stops out breakout traders
Institutional traders fill orders at premium/discount
Smart Money Perspective:
This is pure manipulation — engineered to take liquidity before the real move begins.
Best trade:
Wait for the rejection back inside the range, then enter in the reversal direction.
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3️⃣ Retest Breakout (Most Reliable Format)
This is the breakout followed by a clean retest of the broken level.
Structure:
Break
Pullback
Retest of support/resistance
Continuation
Why it’s powerful:
A retest confirms the level is valid and shows that buyers/sellers are willing to defend it.
Best trade:
Enter on the retest + confirmation (wick rejection, engulfing, BOS).
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4️⃣ Breakout Failure (Distribution/Accumulation Trap)
This breakout fails because market makers are completing a bigger cycle.
In accumulation:
False downside breakouts to trap sellers before pushing up.
In distribution:
False upside breakouts to trap buyers before dumping.
Best trade:
Trade the reversal after the structure shift (BOS → new trend).
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📌 Key Takeaways
Not every breakout is valid — many are liquidity traps.
Wait for structure + confirmation instead of chasing.
Understand why a breakout forms — continuation vs manipulation.
Smart Money always uses breakouts to either collect liquidity or continue trend flow.
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