False breakouts during major news releases are one of the most frustrating challenges traders face, especially in fast-moving markets. A false breakout occurs when price appears to break through a key level of support or resistance but then quickly reverses, shaking out traders before moving in the opposite direction. These types of moves are especially common during high-impact news events like central bank announcements, employment reports, or geopolitical developments. To trade more confidently and avoid being whipsawed by false breakouts, you need a clear strategy, discipline, and a solid understanding of how markets react during news. In this article, we’ll explore practical tips to help you steer clear of these traps and refine your approach to trading around news releases.
Understand Market Context Before the News
Before any major news release, take time to assess the current market conditions. Are prices trapped in a tight range? Is volatility already elevated? Understanding the context gives you clues about potential reactions.
Traders often refer to sites like https://dailynewstrading.com/ to check the economic calendar and see which news events are coming up, so they can prepare accordingly. Watching how price behaves leading up to the event—whether it’s approaching key support or resistance or stuck in consolidation—will help you estimate where false breakouts might occur.
Wait for Confirmation, Don’t Jump In
One of the biggest mistakes during news releases is entering a trade immediately when price breaks a level. Instead, wait for confirmation.
Confirmation might be:
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A candle close beyond the breakout level on a higher timeframe (like the 5-minute or 15-minute chart).
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A retest of the breakout level with a successful hold.
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Additional momentum in the breakout direction after the retest.
This reduces the likelihood of entering on a spike that quickly reverses. Impulsive price movements commonly happen in the first few seconds or minutes after news, and these often fade just as quickly.
Use Wider Stops and Smaller Position Sizes
Volatility during news events is unpredictable. Even legitimate breakouts can retrace sharply before continuing the trend. Therefore, consider using wider stop-loss orders than you normally would to avoid being taken out by random noise.
By reducing your position size while widening your stop, you keep risk manageable. This allows you to stay in trades even if price swings violently before settling. Effective risk management like this is a cornerstone of successful Daily news trading strategies.
Focus on the Big Picture Levels
False breakouts often occur around minor levels that lack strong market conviction. Instead, focus on significant levels such as:
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Major support and resistance from higher timeframes (daily or 4-hour).
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Psychological round numbers (e.g., 1.2000, 1.3000 in forex).
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Key technical indicators like moving averages or trendlines.
Big picture levels attract more attention from institutional traders and are less susceptible to fakeouts compared to minor pivot points. When a breakout occurs at a strong level with fundamental justification from the news, it’s more likely to hold.
Be Aware of News Impact and Market Expectations
Not all news events are created equal. Some have a bigger impact on markets because they deviate significantly from expectations. For example, if an unemployment report is close to forecast, the initial volatility may be short-lived and lead to false breakouts.
Pay attention to consensus estimates and previous releases. When the actual data aligns with expectations, markets may already price in the outcome, resulting in fakeouts. Conversely, a huge surprise can fuel a genuine breakout with follow-through.
Consider a Post-News Strategy
Many professional traders avoid entering during the release altogether and instead wait for a post-news strategy. This means watching price action after the initial volatility settles—often 10 to 30 minutes after the print.
By this time, false breakouts are revealed, and market direction becomes clearer. Post-news entries might include:
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Trading the retest of a broken level after the noise subsides.
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Entering on a confirmed continuation pattern.
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Taking advantage of range breaks that form once volatility normalizes.
This approach makes trading decisions more structured and less emotional.
Keep a Trading Journal
Lastly, one of the most powerful tools for avoiding false breakouts is reviewing your own trades. Keeping a journal with entries, exits, rationales, and outcomes allows you to identify patterns in your behavior and market reactions. Over time, you’ll learn which setups tend to lead to fakeouts and which are more reliable.
By continuously analyzing your performance, you’ll refine your approach to news trading and make better decisions under pressure.
Mastering how to avoid false breakouts during news releases isn’t about eliminating risk entirely—because that’s impossible—but about managing entries, timing, and expectations so that you trade smarter, not harder. With discipline, preparation, and a solid strategy, you can reduce your exposure to fakeouts and improve your overall trading performance.