Crypto glossary
Bull trap and bear trap
A bull trap is a false bullish signal that lures buyers in before the price falls; a bear trap is a false breakdown that lures sellers before the price rises.
In a bull trap, price breaks above a resistance level or rallies strongly in a downtrend, convincing traders that a new uptrend has begun. They buy, often with leverage, but the move fails and the price drops back below the level, leaving them with losing positions whose stops add to the selling. A bear trap is the mirror: a break below support draws in short sellers and panic sellers, then the price reverses upward and forces them to buy back.
Crypto's leveraged derivatives markets make traps frequent and violent, because the trapped side's liquidations can accelerate the reversal. A bear trap that turns into a short squeeze is a familiar sequence on bitcoin and large altcoins.
Traps are defined by what happens next, so they are only obvious in hindsight. Waiting for confirmation, using stops and avoiding heavy leverage around key levels reduce the damage. Persistent fear of traps can also paralyse traders during genuine breakouts.
Example
BTC breaks above a three-month range high and late buyers pile in with leverage. Within two days it falls back into the range, liquidating many of those longs and confirming a bull trap.
Related terms
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