Here's how you can identify and avoid 'bull traps' while trading

Once the stock breaks out, wait for the rally to sustain with decent volumes. Volatility in volume structure reflects uncertainty and indecision. It is better to hold nerves and let the price settle.

A 'bull trap' is a classic case of a false breakout. In general, buyers enter a trade with strong conviction of an upside. However, at times, the stock fails to deliver the upward move and instead hits the trader's stop loss or support levels. Such instances not only affect the trader's morale, but they also start to doubt their trading strategies. Every other triggered stop loss then induces “fear of uncertainty” in the trader and the feelings of “staying away” enters his/her system.

How to identify a bull trap?

Before entering into a trade, one needs to gauge the overall