Bull Traps & Bear Traps
How traps form
A trap forms when price breaks a well-known level, triggering breakout orders from novice traders, then quickly reverses. The 'breakout' was not driven by genuine imbalance — it was driven by orders placed AT the obvious level. Once those orders are exhausted, the larger opposite-side player pushes back.
Bull trap — at a supply zone
Price is rising and breaks above a visible resistance/supply zone. Novice traders buy the 'breakout'. However, this resistance was a supply zone — large sell orders were resting there. Once the breakout buys are absorbed, sellers take over and price drops back sharply. The breakout buyers are now trapped long at the top.
Bear trap — at a demand zone
Price falls below visible support/demand. Novice traders short the 'breakdown'. But the support was a demand zone — large buy orders were resting there. Once the breakdown sells are filled, buyers take over and price rallies sharply. The breakdown sellers are now trapped short at the bottom.
How to avoid being trapped
Wait for a candle to CLOSE beyond the zone before acting on the breakout — not just touch it. A wick through and reversal back is almost always a trap. The close is the verdict. Additionally, if the 'breakout' zone is a fresh, strong demand or supply zone, assume it is a trap until proven otherwise by multiple closes beyond the distal.
Using traps as entry signals
When you recognise a bull trap (fake breakout above supply), it is actually a high-quality Type 3 supply entry — price entered the zone, created an excursion above proximal, and is now reversing back down. The trap is the confirmation the supply zone is holding.
Practice checklist
- At supply: a breakout above proximal that reverses = bull trap — possible supply entry
- At demand: a breakdown below proximal that reverses = bear trap — possible demand entry
- Wait for a candle to CLOSE back inside the zone before acting on the trap reversal
- Long wicks into a zone with no close beyond distal = very common trap signature
Mistakes to avoid
- Buying the first tick above a resistance zone — the most common bull trap victim mistake
- Shorting the first tick below a support zone — classic bear trap entry
- Not waiting for a closing candle to confirm direction after a breakout attempt