What is Bear Trap and Bull Trap?

The financial investment market such as stocks, forex, etc. And the cryptocurrency market in particular, there are always traps waiting for private investors. Among them are definitely bear traps and bull traps, and in this article we need to learn more about these two types of traps, as well as prevention plans to help investors keep risks and losses to a minimum.

What is Bear Trap?

Bear trap, also known as a bearish trap, can simply be understood as a sharp drop in prices during the uptrend period (upward market trend).

Accordingly, bear traps will break through the support price ranges and then quickly reverse the price, encouraging traders (traders) to open short orders via margin trading when they receive them.

Then the price quickly rose again, causing investors who placed short positions to burn their accounts.

If you play margin, please see What is margin? Experience in using trading margin effectively

To make the visualization easier for you, we also analyze the example of bear traps in the following graphic:

The screen shows a 1-hour chart of the ICX / USDT trading pair:

• Point A: This is the ICX price support zone around USDT 0.84.
• After the bullish correction to USDT 0.92, point B is the breakpoint of the support line.
• Given that the support level has broken, investors will see this as an opportunity to take a short position, but the price soon bounced back quickly to the USDT 1 level.
• At point C: indicates a huge increase in prices, at precisely this point bears are forced to sell and sell in order to minimize losses.
• After executing the bear trap, point D indicates that the ICX selling price is continuing its bearish phase.

What is a bull trap?

Bull trap, also known as a bull trap in contrast to the bear trap, is a sudden sharp rise in prices during a downtrend (bearish market trend).

In this situation, the trap is set to make investors clueless and open a long position. However, the price immediately fell sharply again, causing traders who opened long orders to burn their margin accounts.

The screen shows a 15 minute chart of the ETH / USDT trading pair:

• Point A: shows strong resistance at 489 USDT. at
• Point B: indicates that the lows of every bull run are in a steady upward trend.
• At point C: represents a break in resistance against USDT 413 and is preparing to hit the next level of resistance, point D.
  After the price recovered to point F, traders expected the price to rise and entered the USDT 409 support level.
• However, the price fell to just 402 USDT.

Effective Ways To Avoid Bear Traps And Bull Traps

After reading the above information, you probably already know what a bull trap and a bear trap are, and here are a few tips you can do:

Check the above trading volume Coinmarketcap.

A large volume of transactions is required to reverse the price. So if you see a sudden rise or fall in the price but check that the trading volume has not changed, it is most likely a stretched trap.

Look for RSI divergence

Bullish or bearish traps can be found through the RSI (also known as the Relative Strength Index) as it is a graph that shows how strong or weak the price of a coin is.

The RSI fluctuates between 0-100. If it is between 0 the price increases. And conversely, the RSI goes down => the price goes down.

Quickly look up the latest news

News is something that greatly affects the value of cryptocurrencies, whether good news or bad news has an impact on the market. Especially investors who are new to the market because these days there are many types of fake news to use to create FUD or FOMO.

On this basis, sharks, whales, or financial institutions, large mutual funds often use news as an effective way to create bull traps and bear traps.

So when the price has a sharp reversal, quickly go to reputable information websites to check the news to see if there is anything new, and then make a decision.

Place a stop-loss order

Of course, it’s always easier to take profits than try to lose. To keep things from getting too out of hand, investors should use stoploss orders.

Because if you only lose about 3-5% of the trade, you still have the option to correct the mistake on other trades. It is important that your capital only increases and not decreases.

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