Bull/Bear Traps

2 common setups used by more of the day trading orientated people at our firm are climactic sell offs and Bull/Bear Traps. I found an excellent and simply written article on a blog site:


Unfortunately the site hasn’t been updated in awhile, it is a simply written description with relevant examples. The author claims to have been trading for 13 years and my gut intuition is that it is true. Nothing more to go on it except intuition and experience from others that is a profitable day trading strategy.

It took me some time in testing to accurately code bull/bear traps. The missing piece was volume criteria, it is imperative that the reversal happens on large volume. Therefore for testing purposes I had to commit a sin of back-testing and peek forward at the volume for the trap day. In reality, one doesn’t know the amount of volume till the end of the day, by that time of course the trade is over. The trader usually makes a subjective decision on volume based on the opening volume or based on some event or news item that could cause a reversal. In any case, I am convinced enough to begin tracking in real-time, paper trade through a few ‘cycles’ and then decide to allocate capital. Keep in mind that this is a very active trading strategy and requires fast thinking and execution.

~ by largecaptrader on February 27, 2010.

One Response to “Bull/Bear Traps”

  1. […] Perfect Bear Trap QCOM As discussed here, this is the trade you wait all year for. It doesn’t get more picture […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: