How to spot a bull trap?

Have you ever fallen into the trap of a seemingly bullish market, only to find out later that it was just a fleeting surge? If so, you're not alone. Bull traps can be tricky to spot, but with the right knowledge, you can avoid getting caught off guard. So, how do you identify a bull trap? First, pay attention to the overall market sentiment. If everyone seems to be jumping on the bullish bandwagon, it could be a sign that a trap is brewing. Look for indicators that suggest the market is overbought, such as high relative strength index (RSI) levels or a significant divergence between price and momentum. Next, consider the fundamentals of the asset you're trading. If the asset's price is rising without any clear catalyst or improvement in its underlying fundamentals, it could be a sign of a bubble. Finally, be wary of sudden, dramatic price spikes. These can often be fueled by speculative buying, and can quickly reverse as investors take profits. By keeping an eye on these factors, you can increase your chances of spotting a bull trap before it's too late.