medium · Volume Spread Analysis supply-demand-smart-money
How does the 'Negative Response' principle help a trader avoid a 'Bull Trap' when they see a technically perfect low-volume test?
- It suggests that if a test is successful, the market must immediately gap up to confirm professional participation.
- A negative response occurs when the volume on the test bar is higher than the previous two bars, invalidating the signal.
- If the market fails to move higher within 1 to 3 bars after the test, it suggests that background weakness is overriding the signal.
- The principle states that any test in a downtrend is automatically a sign of weakness and should be shorted.
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