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What Causes a Bullish Trap in Forex?

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What Causes a Bullish Trap in Forex? in Forex Advertisements_xx

Bullish traps can occur in forex trading for a variety of reasons. When the market breaks through an important resistance level, traders who are long may decide to close their positions, traders who are short may think that the breakout will not last, the current price is too high, and the market is overbought, which leads to sell orders.

Most of the bearish traders in the upward breakthrough market make trading decisions based on the fundamentals of the market, which is actually an effective way to avoid the bullish trap.

As selling pressure builds and the market moves lower, stop loss orders for bullish traders may be triggered, further accelerating the market downside. Eventually the market could break below an important support level, forming lower lows and signaling a bearish trend reversal.

Liquidity is also a reason for the bullish trap. Low liquidity in the forex market usually leads to higher volatility. When liquidity dries up, even a relatively small buy order can lead to large upside swings due to insufficient sellers. Once the market breaks above the resistance level and sellers start to flood the market, the price reverses quickly.

Source: Forex Rebate

#1 - December 30, 2022, 08:36:52 AM


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