Bull & Bear Traps

Bull & Bear Traps

Bull and bear traps are false signals that are common in the forex market.

A bull trap is a false buy signal following a breakout above a resistance line.

A bear trap is a false sell signal following a breakout below a support line.

Bear Traps

On this chart, the price moved sideways between resistance and support levels near the demand zone.

Novice traders will sell at the breakout of the support line using conventional technical analysis.

The price moved down after the breakout to test the demand zone where professional traders are waiting to buy. Price rallied to the upside.

Bull Traps

On the following chart, the price moved sideways between support and resistance before it broke above the resistance line.

Novice traders will buy at the breakout near the supply zone where professional traders are waiting to sell. Price rose and tested the supply zone to drop to the downside.