Once again, we have Mark Chapman’s Trapped Traders video analysis. He is going to review USDJPY and share with our audience the “trading traps.”
The traps we’re going to look at today at what I call a trap break pullback and these traps occur when traders at the hard right edge believe that a level of support and resistance is actually holding and they’ll start trying to trade off it, believing that it will follow through. The critical part on this setup is that it indeed does start to sell off initially, and I refer to this as the confirming price action that draws traders in or entry cheese.
As soon as the trader commits capital because they had been very seduced and induced in by this strong move down and it pulls back, they enter, their money is now at risk. So, as price breaks through that level, I’m suggesting that humans aren’t very good with discipline and there’s some people in here holding on to their losers and being squeezed.
So, as price pulls back, this looks like a pretty good place to get long.
Source: Forex Traders Daily