The BIGGEST trap in trading (don't fall for this)

Summary

This video highlights the importance of understanding timing in trading, particularly when it comes to price action during weekends and holidays. The speaker emphasizes that traders often get trapped by reversals that occur during these times, as they are usually manipulated due to a lack of institutional involvement. By recognizing these timing patterns, traders can avoid unnecessary stop losses and even profit from outplaying other traders who fall into these traps. The video offers practical examples to show how timing can help avoid mistakes and identify high-probability setups for more profitable trades.

Takeaways

• 😀 Timing is crucial in trading, and not all price actions should be trusted, especially when occurring during weekends or holidays.
• 😀 Price actions like break of structure and liquidity sweeps may seem valid, but if they happen during off-hours, they are often traps.
• 😀 Retail traders tend to get trapped by false breakouts and reversals, leading them to place stop-losses near local lows or highs.
• 😀 When reversals or breaks of structure occur during weekends or bank holidays, smart money is typically inactive, making these moves unreliable.
• 😀 Traders should use these potentially false price actions to their advantage by avoiding entry based on them and waiting for proper confirmations.
• 😀 A market reversal during the weekend or holiday period should be considered a potential trap and not a valid trading signal.
• 😀 Identifying the timing of price action, such as during a bank holiday, can prevent unnecessary stop losses and save traders from losing money.
• 😀 The key to successful trading is entering the market where others are getting stopped out, often after a false reversal or break of structure.
• 😀 Analyzing specific events like liquidity sweeps and break of structures during certain times can lead to high-probability trade setups.
• 😀 By understanding the timing of price action, traders can mitigate risk and take advantage of high-probability setups based on smart money activity.

Q & A

What is the main mistake many traders make according to the script?

The main mistake traders make is trusting certain pieces of price action, such as break of structure, liquidity sweeps, and reversals, without considering the timing of these moves.

Why is timing important when analyzing price action in trading?

Timing is crucial because certain price actions, like reversals or liquidity sweeps, are more likely to be traps when they occur during periods when smart money (institutional traders) is inactive, such as weekends or bank holidays.

What is the concept of a 'trap' in trading as described in the script?

A 'trap' refers to a situation where retail traders are misled by price actions, such as break of structure or liquidity sweeps, that occur during low-activity periods, resulting in them getting stopped out before the market moves in the expected direction.

Why should traders avoid trusting reversals during weekends or holidays?

Traders should avoid trusting these reversals because smart money is not actively involved in the market during these times, making the price actions more likely to be manipulated and lead to traps for retail traders.

How can traders use traps to their advantage?

Traders can use traps to their advantage by identifying when a reversal or break of structure is likely a trap, positioning themselves where other traders are getting stopped out, and then profiting from the true market direction once the trap plays out.

What is the significance of liquidity pools in the context of the script?

Liquidity pools are significant because they represent areas where stop losses are likely placed. When the market sweeps these liquidity pools, it often triggers stop losses for retail traders, allowing others to capitalize on the market movement after the sweep.

Can you explain what 'smart money' refers to in this trading strategy?

In this context, 'smart money' refers to institutional traders or large market players who have more influence and resources to move the market, as opposed to retail traders who often follow the market trends.

What is the key takeaway about the timing of reversals during bank holidays?

The key takeaway is that price actions such as reversals or breaks of structure during bank holidays are less reliable because smart money is not active, making these movements more likely to be traps that mislead retail traders.

What is meant by 'draw liquidity' in the script?

'Draw liquidity' refers to the process of targeting areas where liquidity is concentrated, such as stop loss levels. These areas are often swept by the market before it moves in the intended direction.

What are the practical examples given in the script to illustrate the concept of traps?

The script provides two examples: one during the weekend where a break of structure occurred, leading to a trap for traders, and another on a bank holiday where liquidity was swept, again trapping traders who trusted the reversal.