A bull trap happens when the price of a market looks like itâs going up, but then suddenly falls. Many traders jump in, thinking itâs the start of a rise, but end up losing money when the price drops again. Itâs called a âtrapâ because it tricks people into buying at the wrong time. The key is not to panic and to recognize the signs early, such as low trading volume or sudden sharp rises without strong news.
To win even if you enter a bull trap, always set a stop-lossâa limit where you automatically sell to avoid big losses. Also, try to wait for confirmation before buying, like checking if the price holds steady or if volume increases. If you do get caught, donât chase the loss. Instead, learn from the mistake, adjust your plan, and trade smarter next time.
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