Bull Trap Trading Pattern – A must learn trading strategy
The bull trap is used to call a familiar trading chart pattern that often occurs in a Forex, Futures, and Stock markets. The bull trap pattern is also known as the “upthrust,” the term which came from Richard Wyckoff, founder and onetime editor of Wall Street Magazine. Most experienced traders use this chart pattern to look for trapped traders and benefit from the scenario.
Bull Trap Tech Analysis
Basically, bull trap pattern is a bearish signal forming within an uptrend, which usually occurs in a major resistance level. It doesn’t expect to be on an all-time high. Keep mind that you should look for a bull trap in a bullish market, not in a bear market. There are some instances to catch a turn in a trend yet you should consider that as pure luck.
What really is with bull trap chart pattern?
- Market price is in an uptrend then hits the resistance level, breaks out from it and then continues to move higher.
- Traders who reach a breakout jump in with buy orders and price shoot up.
- Traders are to sell limit short triggered in yet price still move up hitting their stops.
- When liquidity dries up within these levels, market price falls back in the resistance zone.
- Traders are placed short, breakout then jumps in to take back their loss, then get rejoined after being stopped.
Why identify them as “trapped traders?”
– Gets taken out and be trapped out the market
– Longs are within the market then the price pulls back against it trapping them while they still wish for a bounce-back.
Bull trap pattern trading
Bull trap chart pattern may occur in various forms, yet it is the main form. There’s just a need to look for a candlestick that is extremely bullish, break the resistance level, then turns bearish.
Pattern #1 – Bull Trap Trading
On this first pattern that we’ll focus on, the bull trap candlestick breaks then close above resistance zone, yet the nest 1st and 2nd candlesticks after it are bearish.
- It’ll show an obvious resistance level.
- Candlestick breaks out the resistance level and might close over it.
- The second candlestick upon breakout is most probably bearish.
- Keep in mind that the next/second candlestick is most probably bearish, about to become a shooting star or a bearish pin bar candlestick.
Pattern #2 – Bull Trap Trading
The second pattern we’ll focus on is when a bull trap candlestick breaks out the resistance level and to go up yet eventually close below resistance level to form a bearish candlestick. It is the scenario where bull trap candlestick shoots up and then heads downward forming a bearish candlestick and maybe a bullish candlestick with a bearish momentum.
- The price is to break through the resistance level like it’s real upward breakout cause the buyers to jump in.
- The market changes direction heading downwards nearing under the resistance level.
- Breakout low of the bull trap candlesticks price heading down.
- Bull trap candlestick seeks for the situation of a shooting star or a pin bar candlesticks.
- Seek for a bearish candlestick whenever your in these scenarios or an extremely bearish yet bullish candlestick.
Pattern #3 – Bull trap Trading
Our last pattern to focus on, bull trap candlestick breaks out resistance level, goes up yet near below the resistance level. In this pattern, the next one or two candlesticks are more likely a bearish one. Well, the bull trap should be bullish, a green candlestick to be exact. The thing is, it should be nearing under the resistance level. Remember that a bullish candlestick closes below the resistance level will cause a lot of bulls, the price will continue to go higher. Watch out for the first or second candlestick after it, if it’s a bearish candlestick there’s a possibility that it is a bull trap.