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The trap we’re going to look at today is what’s called a structure failure trap, which occurred in this area here. This is a four-hour chart of the CADJPY. Traders at the hard right edge would’ve been very eager to sell this pair after this initial strong drop in price. So, as prices retraced up into the 50 percent Fibonacci level, price did start to sell off, convincing traders in that this was a good place to go short.
However, as you can see, prices have moved strongly since then, so a pullback into this area would represent a decent buy because these traders are trapped short and would be eager to exit those positions at break even.
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