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Hikkake Pattern – Advanced Price Action Strategy

Explore the Hikkake pattern (false breakout), how to identify it and trade with high risk-reward ratio in trending markets.

Mark · Trader & Founder, Social Forex

Hikkake Pattern – Advanced Price Action Strategy

Definition

The Hikkake Pattern (also known as false breakout pattern) is an advanced price action strategy that captures false breakouts and enters trades against the initial breakout direction, usually in the direction of the prevailing trend. It consists of three consecutive candles: an inside bar, a false breakout candle, and a confirmation candle. This pattern is highly effective in strongly trending markets, where false breakouts provide low-risk entry opportunities.

How to Identify

  • Candle 1 (Inside Bar): The body of this candle is entirely within the range of the previous candle (both high and low are smaller). This indicates market indecision.
  • Candle 2 (False Breakout): This candle breaks out of the inside bar's range (above high or below low) but closes back inside the range. This is a trap signal.
  • Candle 3 (Confirmation): The candle closes completely beyond the inside bar's range in the opposite direction of the false breakout, confirming a short-term reversal.
    • CompressionMother BarInside Bar

    How to Trade

  • Entry: When candle 3 closes confirming the reversal (for bullish hikkake: close above inside bar high; for bearish hikkake: close below inside bar low).
  • Stop Loss: Place just below the low of the false breakout candle (bullish) or just above the high of the false breakout candle (bearish).
  • Take Profit: Use Fibonacci extension levels (127.2%, 161.8%) or nearby swing points, typically achieving a risk-reward ratio of 1:2 or 1:3.

    • Real Example

    On EUR/USD H1 chart during an uptrend, an inside bar forms. Price then breaks below the low but closes back inside. The next candle closes above the inside bar high – a bullish hikkake signal. Enter a buy order with stop loss below the false breakout low, target at the previous swing high. Result: target hit with 2.5:1 reward.

    Common Mistakes

  • Entering before the third candle confirms.
  • Trading in ranging markets where false breakouts often fail.
  • Setting stop loss too tight, getting stopped out before the move.
  • Confusing with the simple inside bar pattern (two candles).
    • Price Action — reading candlestick patterns in context

    Content is for reference only, not investment advice. Forex trading carries high risk.

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