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Tips for Spotting a Bull Trap

by icosuccess
, Tips for Spotting a Bull Trap

In technical analysis, what is a bull trap?

Also known as a bullish Fakey pattern, the bull trap is a false signal that gives the impression of a bullish recovery in price following a long bearish signal.

As the name implies, it lures crypto traders and investors who followed the bullish price surge and traps them at a higher price, generating considerable losses in cases where no risk or money management was deployed as a safeguard.

A bull trap/Fakey pattern may also occur in a bullish trend, taunting the trader to open new buy orders in a bullish “rally” that often follows a price collapse.

Trader and investors often buy above the resistance level of an asset because they believe the price will continue in the same direction of the breakout, but they must try to intuit a second price close above the high of the earlier bullish rally as confirmation of the anticipated upbeat swing.

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