About the Bull and Bear Traps

Given that the phenomenon that is produced in the wheel of the stock market is collective contagious, sometimes it occurs that when the ruptures of the price levels of support or resistance are produced, the operators question the validity of these new price levels. In this situation regret for having gone over the limit, the behavior of the price of the stock will be crucial. Two situations can occur in this case, first of all, if these price levels are not backed up by the market, the price, will go back to the price levels they were at before. Another is if the market backs up or accepts the new price levels, these will continue moving in the direction of the rupture of the price limit. According to what was said before, the trap of the bull comes about when a rupture on the price level of resistance is not confirmed by the market and the price goes back to its previous level. When this happens and a person is trapped by this tramp, the situation is very serious. In actuality, it means that we have been too quick to interpret the market and by buying, we have hit on the peak of the price. Then we face the high possibilities of the price going down to adjust itself lower and it can even get to its support price, producing in us the maximum support in the short term. If one does not want to feel this kind of loss, he will have to withstand the resistance price to be able to then recover the price with which we were surprised by this trap in the first place.

The bear trap
The bear trap comes about when a rupture of the price level of support is not confirmed by the market and the price goes back to its previous level. When this happens, and a person is hunted down by this trap, the situation is not as serious, if we are not betting for the low of the market with an operation in short sale. In reality, it means that we have rushed into interpreting the market, and will have sold our stocks at a cheap price at their minimum price. The short sale operation consists in borrowing a stock to be sold at the actual price, betting that your price will go down and that you will then be able to buy it at a lower price to return it, margining the difference in your favor, minus the financial cost charged by the stock broker. In both cases, the analysis of the volumes of combined stock, associated the level of rupture of the price will help to recognize if one is in one of these traps. If the combined volumes are increased in the rupture of the resistance level or support level, and the period right after, the volumes combined are low, then the probability that it is a trap is low. On the other hand if the combined volumes are low in the rupture of the resistance or support level, and the in the next period the combined volumes are high, this means we are in the phenomenon of remorsefulness of the operators, for having broken the limits without any back up from the market. In this situation, there are very high probabilities that the price will go back to the channel of the sub channel, in its limits of resistance and support.

Beginner Money Investing System of Analysis Directional Movement index Relative Strength Index Stochastic Oscillator Indicator Main Channel of Evolution Support and Resistance Changes of Expectation in Investors and Speculators Tendency Channels About the Bull and Bear Traps Mobile Averages Surrounding Range