RIMC Trading Strategy

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Liquidity Trading: Break of Structure (BOS) vs Fake-out (FU) in NJAT Strategy

Welcome to our comprehensive guide on distinguishing between a Break of Structure (BOS) and a Fake-out (FU) in liquidity trading, a crucial skill in the Not Just A Trade (NJAT) forex trading strategy. Understanding these concepts will significantly enhance your ability to read market dynamics and identify high-probability trading opportunities.

NJAT Liquidity Trading Video Tutorial

Understanding Liquidity in Trading

  • Liquidity exists above and below every high and low in the market
  • Banks need to create orders before moving the market in their desired direction
  • Manipulation occurs when price runs above a high or below a low, followed by an aggressive move in the opposite direction
  • Higher timeframe direction is key to understanding liquidity grabs versus breaks of structure

Break of Structure (BOS) vs Fake-out (FU)

Break of Structure (BOS)

  • Indicates a potential trend continuation or reversal
  • Often occurs at significant price levels or after a series of higher highs/lower lows
  • Requires confirmation through subsequent price action
  • More likely to occur at key higher timeframe levels

Fake-out (FU) or Liquidity Grab

  • Designed to trap traders on the wrong side of the market
  • Often occurs before a significant move in the opposite direction
  • Characterized by a quick run above/below a key level followed by a sharp reversal
  • More common in ranging markets or before trend reversals

How to Identify BOS vs FU

  1. Analyze the higher timeframe direction and key levels
  2. Look for aggressive moves after breaking a key level
  3. Observe the price action following the break: does it continue or quickly reverse?
  4. Consider the market structure and whether a trend change is likely
  5. Use multiple timeframe analysis to confirm your interpretation

Applying BOS and FU Concepts in NJAT Trading

  • Use BOS to identify potential trend continuations or reversals
  • Recognize FUs to avoid getting trapped and to find high-probability entry points
  • Combine BOS and FU analysis with other NJAT concepts like RIMC for comprehensive trade planning
  • Practice identifying BOS and FU on multiple timeframes to improve your market reading skills
  • Use these concepts to anticipate potential market moves and manage your risk effectively

Tips for Trading BOS and FU

  • Wait for confirmation before entering trades based on BOS or FU
  • Use proper risk management techniques, especially when trading potential fake-outs
  • Consider the overall market context and don't rely solely on BOS or FU signals
  • Be patient and wait for high-probability setups that align with your analysis
  • Continuously review and refine your ability to distinguish between BOS and FU

Suggestions for Practicing BOS and FU Identification

  • Regularly analyze charts to identify potential BOS and FU scenarios
  • Keep a trading journal to record your observations and trade outcomes
  • Use demo accounts to apply your BOS and FU analysis in real-time market conditions
  • Participate in NJAT trading floors to discuss and analyze BOS and FU with fellow traders
  • Review historical price action to improve your pattern recognition skills

Master Liquidity Trading with NJAT

Understanding the difference between Break of Structure and Fake-outs is crucial for successful forex trading. To fully master these concepts and gain access to our in-depth training and support, consider joining our comprehensive NJAT trading course.

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