This is a bull trap trading strategy, a price action trading strategy.
If you don’t know what a bull trap is, then read this post: what is a bull trap in forex trading?
If you don’t know the types of bull trap chart patterns to look for to use this bull trap trading system then read this post: 3 bull trap chart patterns every forex trader needs to know.
What You Need For This Bull Trap Trading System
- Currency Pairs: any
- Timeframes: preferably 1 hr and above
- Knowledge required: bearish reversal candlesticks and would also help to know multiple timeframe trading techniques
- Forex Indicators: none required
Ok, now lets get to the trading rules…
Bull Trap Forex Trading Strategy Trading Rules
- When price heads up to a major resistance level, you need to sit up and watch the price action that happens on that resistance level to see if you can spot a bull trap chart pattern and once you see that a potential bull trap chart pattern is forming you go to the second step.
- Place a sell stop pending order at least 2 pips below the low.
- Place stop loss at least 2 pips above the high
- for take profit, aim for the previous swing low price level or aim for a risk to reward of 1:3 at least.
Disadvantages of Bull Trap Trading Strategy
As with all forex trading strategies, every system has its weakness that is beyond a traders control.
There will be times when what appears to be a bull trap will actually turn out to be a true breakout to the upside a while later.
Finding proper resistance levels where you can watch for bull traps may be a challenge for new forex traders but here’s a clue…switch to the weekly or the daily timeframes and look at your chart…can you see those “mountain peaks?” that actually “stand out?”
Those are the resistance levels that you should be watching for bull traps.
Advantages of Bull Trap Trading Strategy
- Excellent risk:reward ratio when trade works out as anticipated.
- it becomes a really simple and effective price action trading system once you begin to understand how to implement it.
Check out my free price action trading course.
Thanks for visiting forextradingstrategies4u.com, wish you many profitable pips!