Bonus 1: End of Day Traps

Question 1

What is a Trap?

Answer 1

Simply, a failed Breakout
80% rule of inertia. Picture, bulls bought a strong trend reversal. Hoping for a bull trend or second leg up.
80% of reversals fail, even if they’re strong.
Here there is a bear bar closing on it’s low after the breakout.

Question 2

Here, look at context to the left.

Answer 2

No one is trapped. Because of the price action, traders expect reversals

Question 3

Every time there is a bear trend, late in the day there is usually some _______.

Answer 3

Profit Taking

Question 4

More Trap examples

Answer 4

Question 5

Double Tops are rarely perfect. See photo. This failed at EMA

Answer 5

Question 6

2nd Leg trap is:

Answer 6

First leg, then pullback. Then second leg.
In this example is it simply a buy vacuum test of prior high?
This failed at the double top.

Question 7

Reversals: Bull trends from bear trend start from bears covering their shorts/taking profits.

Answer 7

If their buying is strong enough, short covering can become bull trend.

Question 8

Define Long Liquidation:

Answer 8

Bull profit taking

Question 9

Late Bear Trap

Answer 9

Whenever you have a tight bull channel, selling a reversal is often not a good idea.
Usually a reversal down from a very tight bull channel is going to be minor.

Question 10

Trap creating a Measuring Gap

Answer 10

Whenever you see any type of reversal, always look to the left.
The picture looks like a breakout test of the high. Created an open gap. Bulls bought heavily.
This pullback tested the breakout point (The high of the first leg).
Might have created a measuring gap for a measured move. if market goes up, traders will be more confident in reaching the measured move and market will go up. Buying aggressively and get vacuumed up tot the target very rapidly.

Question 11

Example of failed breakout above a Wedge

Answer 11

This was a trap testing support (failed bear breakout)

Question 12

Later in the day, if you’ve had a small pullback Bull Trend, there’s usually a pull back lat in the day that is _________% bigger than earlier Pullback.

Answer 12

50 - 100% Bigger
Selloff can be very strong
Usually becomes a bear trap.
Aggressive bulls bought to test the high of day

Question 13

Here is a failed end of day bear trap that turned into a bear trend

Answer 13

On the way down, bulls had small bars at attempt of reversal. Weak buy signal bars.