Bull Trap Guide: How to Identify and Escape

A bull trap appears during bullish trends. The price rises. It reaches resistance. It breaks that level, as everyone expected. It looks promising.

It is misleading. It gives that false "breakout confirmation" that we are all looking for. Traders see this and get excited. They buy. They believe in the continuation of the rally.

And then it happens. The price turns. Drops sharply. Without warning. The stops trigger. Others get trapped with losses. A disaster.

How can I identify a possible bull trap?

There are clues. They are not perfect, but they help:

1. Several tests at the level of resistance
2. A rare bullish candle, too big
3. A range is formed. It seems indecisive.

Examples of common bullish trap patterns

1. The double top rejected
2. The bearish engulfing
3. The failed test

How to avoid the bull trap?

Never enter late. Avoid buying at resistances. Wait for real confirmation. Look at the price action. Tell stories.

How to trade with bull traps?

Method #1: Buy on retests

• Let the price test the resistance turned support
• Look for bullish signals
• Stop below support. Take profits at the next resistance.

Method #2: Short selling after trend reversal

• The price must break below resistance
• Wait for a bearish retest
• Enter short. Stop above.

Conclusion

Understanding bull traps can be profitable. Curious, isn't it? What was once a threat is now an opportunity. The market rewards those who know how to read it. It's not always clear, but that's the advantage.