In here, I will show you 3 bull trap chart patterns that not many forex traders, especially new forex traders know about.
And I hope you learn something from it.
It is important that when you see price head up to a major resistance level, you should keep an eye out if you can spot these bull trap chart patterns that I’m going to show you.
Table Of Contents
Bull Trap Technical Analysis
A bull trap chart is a bearish signal that forms in an uptrend.
The most common place for bull trap to happen is in a major resistance level/zone. Which means if you see it happening, you should look to sell.
So what happens is that price is in an uptrend and price hits the resistance level and breaks it and continue to move up.
Breakout traders jump in with their buy orders and price shoots up and they are happy, life is good they think.
But their joy is only short lived.
A few candlesticks later, that upward breakout loses its momentum and then price starts to fall…and it falls a long way.
Those bulls (buyers) who bought are now feeling the pain as their stop loss are getting hit or about to get hit.
They are now trapped…they have been deceived.
That’s how a bull trap happens and causes grief for many forex traders.
Definition of A Bull Trap Candlestick
So what is a bull trap candlestick?
- It is the first candlestick that breaks the resistance level and closes significantly above it
- it can also be the first candlestick that breaks the resistance level and goes up then then eventually heads down and closes below the resistance level
Bull Trap Chart Pattern #1
A Bull Trap Candlestick Breaks And Closes Above A Resistance Level But The Next 1st or 2nd Candlesticks After That Are Bearish
The char below shows an example of this situation.
- You can see an obvious resistance level.
- a bull trap candlestick breaks the resistance level and closes above it.
- however, the 2nd candlestick after the breakout is bearish. As a matter of fact, it is an inside bar and combining it with the previous candlestick before it, it forms a bearish harami pattern (a bearish signal).
- Also note that the next (2nd) candlestick is also bearish, almost a shooting star or bearish pin bar type of candlestick.
- next thing you know, price drops….it was a bull trap.
Bull Trap Chart Pattern #2:
A Bull Trap Candlestick Breaks The Resistance Level and Goes Up But Eventually Closes Below The Resistance Level Forming A Bearish Candlestick.
This is when the bull trap candlestick shoots up and then headS back down and forms a bearish candlestick or it can be a bullish candlestick with a “bearish momentum.”
It is a one pattern candlestick. You are only looking for one candlestick that does this.
This chart below shows you are very good example:
- price breaks through the resistance level as if a real upward breakout causing buyers to jump in.
- then it changes direction and head down and closes below the resistance level.
- the fact that it close below the resistance level should be a warning sign that something is not right and it is most likely a bull trap.
- the breakout of the low of this bull trap candlestick see price heading down.
- bull trap candlesticks to look for in this situation are shooting stars or pin bar candlesticks.
- Ideally, look for bearish candlesticks in this situation or extremely bearish looking bullish candlesticks.
Bull Trap Chart Pattern #3
A Bullish Bull Trap Candlestick Breaks the Resistance Level, Goes Up But Closes Below The Resistance Level. The Next 1 or 2 Candlesticks are Bearish
Read the above carefully .
The bull trap candlestick must be bullish…it will be green candlestick in other words.
The only thing is that it must close below the resistance level.
The fact that it is a bullish candlestick that closes below the resistance level will cause many bulls (buyers) to think that the price will continue to go up…
Then here comes the next clue: watch the 1st or 2nd candlestick after that. If they are bearish candlesticks, then there’s a great chance that it is a bull trap.
Summary Of Bull Trap Chart Patterns
A bull trap chart pattern is a bearish signal when you see one forming.
This may not be the complete bull trap chart patterns guide but at least now you know what to look for for price is heading up to a resistance level.
Remember, bear trap chart pattern form in an uptrend when price is heading up to a major obvious support level.
It is also important for you to be knowledgeable about reversal candlestick patterns and understanding candlestick momentum so that you can be able to see the sell signals they generate when you see a potential for bull trap forming on the resistance levels.
Other post that you may also be interested to read:
- my free price action trading course
- top 10 reversal candlesticks
- how to trade elliot waves in 6 simple steps
- order flow trading ( a guide to order flow trading)
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