Market traps are false signals that can lead to losses. Two common market traps are bull traps and bear traps. Investopedia+2A bull trap is a false signal that refers to a declining trend in a stock, index, or other security that reverses after a convincing rally and breaks a prior support level. The move "traps" traders or investors that acted on the buy signal and generates losses on resulting long positions. 2A bear trap is a technical pattern that occurs when the price action of a stock, index or another financial instrument incorrectly signals a reversal from an uptrend to a downtrend. In other words, prices may move higher in a broad-based incline, only to encounter significant fundamental resistance or change. 1
Disclaimer: Includes third-party opinions. No financial advice. May include sponsored content.See T&Cs.
