Trading Traps
Bull Trap
A false breakout upward that quickly reverses
A bull trap occurs when price breaks above a key resistance level, attracting buyers, only to reverse sharply and trap them in losing positions. It exploits bullish sentiment at the wrong time.
✓How to Recognize
- •Price breaks above key resistance
- •Volume is below average on breakout
- •Quick reversal within 1-3 candles
- •Failure to hold above the breakout level
⚡How to Avoid
- →Wait for a confirmation candle close above resistance
- →Check volume - real breakouts have high volume
- →Look for retest of broken resistance as support
- →Use stop loss above the breakout high