Intended to convince market participants of a price correction, bear traps are orchestrated by entities with large holdings to make quick profits.
How to identify and avoid a bear trap?As a difficult proposition for novice traders, a bear trap can be recognized by using charting tools available on most trading platforms and demands caution to be exercised.In most cases, identifying a bear trap requires the use of trading indicators and technical analysis tools such as RSI, Fibonacci levels, and volume indicators, and they are likely to confirm whether the trend reversal after a period of consistent upward price movement is genuine or merely meant to invite shorts. Any downtrend must be driven by high trading volumes to rule out the chances of a bear trap being set up.
