Category:BLTP

Bull Trap, failed bull breakout. Watch out for possible bull traps when:

• Price is around important SR like EMA or HOY, even sometime there is a strong rally rushing to the SR in 2 or 3 good looking trend bars after gap down, it can be a trap, example of 20230124; another example 20230322 bar 10-12;
• CCBLB that looks very bullish on the surface, but bars have prominent tails and overlaps.
• Market reverse quickly right after the stop order is filled by 1 or 2 ticks above the CC bars.

Examples of Common bull traps

Traps on the open at EMA

In below example of 20230124, yesterday had a BLTFO and a selloff in the afternoon, today morning market had a gap down, followed by a strong bull reversal attempt in 3 good CCBLB from bar 3-5, then bar 6 became a huge BRBCL by just going 1 tick above 5. Notice that bears sold aggressively not far above EMA, bar 3-5 have prominent tails (especially bar 2) and overlapps, even though they look like 3 good CCBLB on the surface. If 3/4/5 all only have small tails, hence gaps, 5 will be a better BTC.

if bought above 5 for BTC, the stop should be below 5 at least for half of the position, especially when seeing market quickly reverse down by going 1 tick above 5, that is a good sign of possible BLTP. As a general rule, traders should put the stop right below the signal bar no matter where he entered, at least for half of the position, because if things like bar 6 happens in short amount of time, it is likely that market is doing the opposite of what traders want.