What Is A Bear Trap In Forex Trading? ( INCLUDES 5 TIPS TO AVOID IT)

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The price breaks out in the direction you expect, and you jump aboard with a trade. Moments later the breakout has failed and you find yourself in a trade that is rapidly accelerating in the opposite direction. Welcome to bull traps and bear traps; terms used to describe an event where traders are trapped into thinking one thing is about to happen, only to have a bait-and-switched pulled on them.

Bear and bull traps forex bear trap dubai in all markets and on all time frames. I see them when I day trade futures and I see them in the forex market. When London opens in the forex market it is very common to see a bull or bear trap.

Typically there is low volatility overnight, and when London opens the price moves outside that range on one side or the other only to move back the other way shortly after. Traders looking at the overnight session may view this as a breakout, and it may be, but it also could be a trap.

The overnight range forex bear trap dubai marked with horizontal lines, showing the forex bear trap dubai high and low. As London opens highlighted in yellow the price just edges above the overnight high. Since buying on new highs is a common strategy not one I endorse it is likely many traders get caught by this type of price move—buying on the new high only to have it quickly move back the other way.

The price then finally settles forex bear trap dubai a downtrend. There are several ways to deal with traps. Before getting into them though it is important forex bear trap dubai point out that bear and bull traps are quite common.

The first option is to do nothing. If you have a winning trading plan, losing trades happen. Accept that you may occasionally get stuck in a bear or bull trap and accept it. For example, you sell a breakout to the downside, the price moves only slightly lower and then snaps back the other direction. Exit the short or put, and go long or buy a call.

The danger here is that it is possible to end up with two losses instead of just one. This third option involves altering your strategies to avoid trade setups which often result in forex bear trap dubai and bear traps.

During a downtrend, for example, I sell during pullbacks higher and exit just beyond former lows basically I am getting out on those traders who are just entering on the new low. In an uptrend, I enter during pullbacks lower and exit the trade usually just beyond a former high.

Watch for traps and trade them instead of the breakout. Instead, simply watch for a bull or bear trap and trade it.

For example, you see a small range develop. The price pops above the range only to quickly drop back into the range and continue dropping. Accept it and forex bear trap dubai on a game plan for how you will handle these events. No matter what method you choose, make sure to test it and assure its profitability over many trades before using the method with real money.

Bear Traps and Bull Traps Bear and bull traps occur in all markets and on all time frames. Dealing with Traps There are several ways to deal with forex bear trap dubai.

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