The traps we’re going to look at today is what I refer to as structure failure traps, and we also have a rat trap, which occurred in this area here. Traders at the hard right edge would’ve believed that the market was heading lower because it had been making a series of lower highs and lower lows, which is a definition of a trend. The traders enter the market as price breaks through that level, and when prices retrace and sell off momentarily.
This is what I refer to as entry cheese because this is the confirming price action that tempts the trader in to take some risk. However, no sooner do they do that, the market has moved aggressively against their position and they are in here, losing a lot of money. If price pulls back, this looks like a great place to get long.