Bear Trap : Tips to Avoiding the Trap.

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Hello friends, trust y'all are keeping well, welcome to my blog. I hope y'all got value from my last post on Bear trap. Well, we would go much deeper into that topic today as we would be looking at tips on how to avoid this trap while trading the crypto market.

So guys fasten your seat belt. I promise not to make it a very long ride but one that would be with a considerable length and also comprehensive. Let's get into it right away.

Introduction

Avoiding bear trap is not something that can be handled casually, it requires a lot of trading intelligence, good trading plans and very discipline risk management. Infact risk management is key, it is very underrated but those who have learnt by experience can tell you how important it is to have a good risk management practice which you must subject yourself to. Subjecting yourself to it is called Discipline.

Anyways we would be looking as some point which would help us stay afloat in those manipulative phase of the market. You can find them below.

• Trend Confirmation: I understand how eager a trader is when he is looking to get early into a trend just to scoop in a substantial profit but then caution needs to be taken. One must confirm that the trend has been established before jumping into the market.

The initial breakout below the support line might be a trap to short and when you jump in, you get all caught up because the trend is just a temporary one which have no basis. One should confirm the trend or move via volume, price action and moving averages. Tools like RSI, MACD can also be of great help as they help to point out reversal point and check market sentiment.

• Sentiment Analysis: One can monitor investors sentiment via news, market commentary and the likes and the interesting part is that their reaction can bring about a potential shift in the market.

For example, when there is a positive news, we all expect the market to appreciate and even pump but when we see a negative reaction such as a significant drop in price then one should know its could just be the bear trying to trap their unsuspecting prey.

• Use indicators for confirmation: it is true that indicators do not give 100% result but then it can give accurate result to a remarkable degree, especially when combined to analyse. In the case of bear trap, indicators such as RSI, Volume, MACD can show the true state of the market.

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Volume indicator can help you spot bear trap even before it fully manifests. Market volume react by changing significantly when price approaches new high or lows. True trend reversal involves significant rise in volume. Now if there's is drop in price without a significant rise in volume, it could just be a bear trap.

Fibonacci is another great tool that can keep traders safe from bear trap, if price fails to cross key Fibonacci lines then the trend reversal can be said to be a temporal one which is aimed at trapping unsuspecting traders. The MACD could also help out such that if a downtrend is spotted with a divergence, then you have to watch closely, could be a trap.

• Risk Management Practices:

A good risk management practice must be put in place by trader if they do not want to be caught up. The absence of this in one's trading activity can show the trader the way out of the market. The market is brutal when it comes to putting traders at loss or liquidating them. To avoid this, you should do the following....

Use a stop loss order. This is very important. A stop loss order helps close your trade automatically when the market goes against you thereby reducing your loss to the very amount you can afford to lose in a trade and not more than. A bear trap can actually liquidate an account if a stop loss order is not used.

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Position sizing. This is also key, traders must ensure that their position sizes syncs with their overall risk tolerance and investment plan, to avoid stories that touches the heart...lols.

Hedging. This is another strategy that trader can use to protect their position. One can use options and other derivatives to hedge one's position so that one can be protected when the market goes south.

Bottom Line

Bear trap would always be a manipulative strategy by the bears, we just have to carefully approach the market and not be in a haste to jump into the market without confirming the market movement or trend. Indicators are at our disposal, let's do well to maximize them.

I want to believe you've gotten so much from this piece. As my usual custom is, I would always encourage that you DYOR to be sure of every financial step you would want to take as I won't be liable for any form of loss encountered by you.

Feel free to share with me your thoughts in the comment section. Thanks for your time once again. Gracias!

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^{Disclaimer: This post is made as an education and not investment advice. Digital asset prices are subject to change. All forms of crypto investment have a high risk. I am not a financial advisor, before jumping to any conclusions in this matter please do your own research and consult a financial advisor.}

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Regards
@lhorgic♥️

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