A Crypto Traders’ Guide On Detecting Bull Trap

Have you already made a deal anticipating a boost in the current price only to see it fall suddenly and without warning? A bullish candlestick appears on the diagram when the price drops past the barrier or regression line. The price is going up, and all indications also keep rising. As an outcome of these indicators, our hopes were elevated. It persuades us that starting to trade cryptocurrencies was the proper move. Browse Bitcoin Pro to experience a dependable yet simple-to-use and licensed platform that provides a wide range of cryptocurrency assets. 

However, that isn’t always the reality. We may think that the momentum will keep growing. However, the value will soon drop back to the starting point. The majority of traders feel this is just a brief halt before the marketplace continues its upward trend. This, unfortunately, is merely a vision. The spike may not come, and you may be pulled out of the transaction, leading to a potential loss. What is the reason for this? It is a position for traders who don’t even understand how to identify a bull trap. This article walks us through the various bull trap chart trends. 

In an up-trending market, the bull trap chart behaviour is what we may call a negative indication. It is most commonly found at the significant resistance line. As a result, when initiating a pattern, a trader must determine where the primary resistance level is located. If significant resistance levels hold, the market is more likely to veer off course. 

In the event where there is a bull trap, what happens next? This occurs most frequently in a bullish market. It’s why traders have great expectations; they anticipate it will reach the next level! Generally, it will burst through the resistance level and then move higher. Breakout traders are more prepared to join a trade if they notice this. Several traders’ actions bolster the bulls’ capacity to drive the market higher. 

What is the most probable situation? Traders who have established sell restrictions or have risky assets will receive an alert. They’ll be turned off shortly. The bulls’ power will eventually diminish, and the market will revert to the degree of resistance from which it sprang. If this happens, traders will take a short position. Breakout traders who went in intending to earn revenue but wound up losing are in a similar boat. They’ll return to their previous short position. Therefore, it has earned the moniker “bull trap.” Traders are caught in a bit. Some have had their short holdings halted and are unable to access the market. Long-term investors are unable to exit the market, implying that they are expecting the prices to go up. 

In diagrams, bull trap configurations are prevalent. The rest of the cases show a specific pattern. A pending resistance level may be found in the chart’s upper part. Because when price approaches the levels of resistance, the first candlestick smashes it. A bearish candlestick, on the other hand, follows it, indicating a turnaround. In that event, the momentum is projected to flip. 

It’s also possible to do it with only one candlestick. The value is briefly broken once it hits the resistance level. However, it swiftly reverses the direction, generating a bearish candlestick that looks like a bright star or a pin bar. This formation is a sign of poor bullish strength, which could suggest a trend redirection or reversal. 

Final Thoughts

We may conclude that when the price hits a significant level of resistance, we must not make a trade. We’ll have to watch for a turnaround trend to see if the bulls’ drive is still robust or fading. Thus,  you must be able to read price movements.

It’s harder to understand when to trade with multiple indicators. Following up on a particular approach for understanding the crypto market after mastering it, one should perform further research. Most significantly, it is a great way to test it out before using it to execute actual deals. For someone who has never traded previously, it’s important to know that opening a cryptocurrency exchange account is a must for thriving the volatility in the crypto market.