So,what is a Bull trap?
Bull trap is a way to make people believe the value of a particular asset or commodity will rise in price. It’s a false signal, usually its connected with FOMO.
How to avoid Bull Traps?
Traders and investors can avoid bull traps by looking for confirmations following a breakout.Search for higher than average volume and bullish candlesticks following a breakout to confirm that the price is likely to move higher.Quick internet research about the news that you might missed for the current crypto may also cause spike in the price.
Example: Bitcoin started to rise fast,
All exchanges in USA are removing the fees from depositing & withdrawing bitcoin.
Don’t forget about the Doji stars!
The fear of missing the trend is real.Whenever FOMO kicks in, it is evident people have a higher chance of falling for a bull trap. This market sentiment is very dangerous, although it can also yield to some quick profits when playing one’s cards right.
Inaccurate signals showing upward momentum of any asset or commodity should always be taken with a grain of salt. It is certainly possible markets to go up and down in value all the time. Learning patterns is one way to protect oneself from such changes, although patterns are also there to be broken. Bitcoin users who feel they bought at a too high price, they should patiently wait for the market to recover. This is not the last price increase we have seen in the Bitcoin market, that much is certain.
Example: 2018 Started with high prices and shortly after ( 1 week after the new year ) Prices started to go down.
For two weeks, bitcoin went from $20k to $10k. People who bought it on the trend, believing its going to grow like that in the near future, got burned very heavily.