A bull trap is when a market is clearly in a bear trend. Yet, against all odds its bounces back, leading investors to possibly change their minds as to whether their investment is truly in a bear market. It’s called the ”bull trap” because all the investors who believe the market has changed, they are effectively trapped by false analysis of the chart. Which means they stand to lose money.
Let me give a real world example.
Live Bull Trap Experiment
Bitcoin has been showing strong signs of a bear market for months now. April 2021 Bitcoin hit a top of 65,000 BTC/BUSD, in my opinion, which means that we are on the way down. The cryptocurrency market has a cycle of approximately 1.5 years and I doubt this will change, although I could be wrong.
If you have a look at the photo, you can see that Bitcoin has made a huge rebound of over 15% within a few days. This has spooked investors and speculators alike whether Bitcoin is going to surge higher, possibly break new highs this year. This huge bounce has spiked public discourse around bitcoin, my opinion is, it’s difficult to know who you should listen to.
Anthony Pompliano – Bitcoin is going to the moon
One online commentator ”Anthony Pompliano” uploaded a video titled ”Will Clemente: Bitcoin Is Going To The Moon In Q4: Full Interview” 2nd October 2021. This commentator I’d say believes that bitcoin is now in a bull market, which is exactly what the ”bull trap” warns about, only time will tell.
I Believe Bitcoin is in a Bear Market
This is my belief at the moment, I’m out of the market right now, just waiting for it to drop. I’m hoping for 15k BTC/BUSD within the next 6 months. Only time will tell, but this is a great experiment to make and you can follow along, or if you happen to be reading this in the future, all you’ll have to do is check the charts.
Here are some other technical analysis articles I’ve made for you:
- How to use support and resistance in technical analysis
- What is Dow Jones Theory?
- Eliott Wave Theory in technical analysis
- How to swing trade cryptocurrency
- How to trade the relative strength index (RSI)?
- What is the rising wedge?
- How to trade the head and shoulders pattern?
- How to be a Bitcoin millionaire
Thanks for reading, keep in mind this is not financial advice, it’s only my thoughts on the matter.
