Bull Trap Trading Strategy (Rules, Backtest, Performance)

In this article, we will look at one of these traps; why does it happen? Who is responsible for them? Why does it concern you, and can you outsmart it? We show you how you can profit from a bull trap trading strategy.

Some traps are set for you in the market. Shocking, but it is true. Not all losses are a random hand of the market’s probability model, and some are carefully crafted to take your money away.

You might find it challenging to wrap your head around why such a regulated industry as this traps traders like us. If you have been trading for a while, you’d have fallen prey to these traps repeatedly, and knowing much more about them is critical to your investment career.

Related reading:

What is a Bull Trap in Trading?

There’s a famous phrase thrown around amidst technical analysis folks: “the trend is your friend,” this is advice always to follow the prevailing trend whenever you want to open a position.

While this is sound advice, it becomes irrelevant under some circumstances, such as trend reversals (because trends don’t last forever.) So, how do you make trading decisions when the price is about to reverse?

There is a common way most traders approach these market conditions. They often jump in because they don’t want to be left behind when a new trend is forming. The market manipulators are also aware of this, and they have come up with a perfect tool to cash in on this mass fallacy; it’s called the “Bull Trap.”

A bull trap is a pattern formed to “trap” buyers (bulls) into buying in a bearish trend, after which the price suddenly turns against them, and they are forced to close their position in a loss.

Various factors, including market manipulation, false or misleading information, and herd mentality, can cause bull traps. They can be challenging to spot, as they often involve a sudden and signif