Bull Trap Explained?
A bull trap is a term used in trading and investing, specifically in the context of technical analysis and chart patterns. It refers to a situation where the price experiences a temporary upward movement that gives the appearance of a potential trend reversal or a bullish breakout. However, this upward movement is deceptive, as the price then quickly reverses and falls back down, often trapping traders who entered into long (buy) positions based on the false signal.
Actual Bull Trap Trades – Lose
23rd Aug 2023 – Enter long, bought on close at 08:10am UK time. Completely collapsed after 4th bar after entry… Lost 20 points.I should have spotted the 2 bar bear reversal pattern.
10th Aug 2023 – Enter long, bought on close. With slight pullback continued rising then collapse, to stop me out for break even. I should have spotted the 2 bar bear reversal pattern.
4th Aug 2023 – Enter long, bought on the pull back, second entry long but it reversed down below my entry for a loss of -10 points. I should have spotted the 2 bar bear reversal pattern.
The 2 bar bull reversal charts are from my live broker TD365, create a demo account.