Today I will show you the 5 most LETHAL BULL TRAPS on the market and how to quickly identify them. Don't waste your capital on misleading signals anymore, pay attention to every detail, I brought you graphics to see them up close.
Remember that learning to recognize these signs will make the difference between making big profits or ruining your capital.
Let's see quickly:
1st BULL TRAP: the "VOLUME FALLACY"
In this case, there is a significant increase in the volume of purchase orders, generating an expectation that the price will continue to rise, but then it retreats and activates buyers' stop losses.
To avoid the fallacy it is important that the resistance break is confirmed by a continued increase in price and that volume continues to support the price rise.
2nd BULL TRAP: the "FALSE BREAKUP"
In this trap the price of the asset breaks an upward resistance but retreats before being able to confirm the bullish trend.
Within this configuration, several graphic patterns can occur, such as:
1. Of an ascending triangle:
2. From a double roof:
3. From an uptrend line:
4. On a psychological level:
A psychological level is a round or significant number that acts as a reference for investors, such as $10,000, $20,000 or $30,000.
These levels act as resistances or supports that make it difficult for the price to advance or retreat.
To avoid falling into any of these traps, you have to watch the trading volume, that is, wait for confirmation, for example, that the price closes above the resistance with significant volume, with a volume bar twice as big as the bars of the last few days, another condition to review is that new support forms at that level.
Is the RSI overbought? This is a good sign that may indicate a possible reversal.
3rd BULL TRAP: The "MAXIMUM TRAP"
It occurs when the asset's price breaks a previous high, but then falls back below the resistance level, indicating that buyers were unwilling to maintain the uptrend.
4th BULL TRAP: the "ILLUSION OF AN IMPORTANT EVENT"
This trap is generated when there is great expectation about an economic or market event, such as the announcement by Larry Fint CEO of BlackRock speaking well of Bitcoin, but the result does not meet expectations and the price falls.
5th BULL TRAP: the "DARK CLOUD"
The dark cloud is a candlestick pattern that occurs after an uptrend and suggests a possible bearish reversal. This formation consists of two candles: the first is a large bullish candle, followed by a bearish candle that opens above the high of the previous candle and closes below the middle of it.
Learning to recognize these traps will allow you to better manage your operations when the price is in an upward trend, near a resistance zone, forming one of the aforementioned graphic patterns.
At this point, patience, relying on historical price patterns, validating with trading volume and price action to confirm the validity of the resistance break will be your best weapons, as well as using an indicator if you prefer to validate the breakups.
This will definitely make a difference in your trading and you will be preparing to take advantage of the opportunities that the market offers you.
"The ability to be comfortable in uncomfortable situations is the sign of a great investor, making decisions under pressure is what separates the winners from the losers." but also "knowing when to take profits and retire is a talent that few reap." C Wood.
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