The Bear Trap is a false panic signal that prompts you to sell or short just before the price spikes. It's a move designed to liquidate leveraged traders and provide the fuel (forced buying) for the rally.
🐻 Characteristics of the Bear Trap
The bear trap is built on the fear and overconfidence of short sellers:
Panic support break: The price breaks a key support level or ascending trend line, often following panicked news. This appears to be the start of a decline.
False volume: The break occurs with a volume that is low or disproportionately low for such a decisive downward movement. If major players are not selling sustainably, the drop is a deception.
Violent recovery (The Squeeze): The price remains below the broken support for a very brief time (sometimes only minutes) and immediately returns strongly above the level. This forces newly entered short sellers to close their positions at a loss, creating a forced buy that drives the rally.
📉 Characteristics of the Real Downward Trend (Continuation or Reversal)
A real downward trend is sustained, backed by a change in market structure and the exit of large capitals:
Break and Acceptance: The price breaks the key support with high and consistent volume. The market accepts the new lower price.
New High (The Failed Retest): After the break, the price attempts to rise to test the broken support level (now turned resistance), but fails miserably and falls again. This failure confirms the new downward trend.
Market Structure: The asset begins to form lower highs and lower lows. This is the structural sequence that confirms the dominance of sellers.
💡 The Key Investor Challenge
Do not assume that a drop is real if it occurs quickly and without confirmation of structure.
If the price breaks through a key support and violently rebounds upwards, it was a bearish trap.
If the price breaks the support, consolidates below it, and then fails to surpass it, the downward trend is the reality.
Smart Capital does not chase drops; it waits for structural confirmation to open a short or a rebound to open a long.
