A bull trap is a term used in trading to describe a scenario in which the market “fools” an investor by sending a false signal to buy an asset but then reverses course.

The inability or unwillingness of traders to maintain an upward movement results in a bull trap.

If an investor makes emotional, rushed, and poorly thought-out judgments based on a small set of trading tools, the probability of slipping into a bull trap increases.

How may one get caught in a bull trap?

This circumstance arises when the market exhibits the first indications of sustained growth or a potential switch from an asset’s declining price movement to an increasing one.

The “trick” of the market is that while buyers (the “bulls”) expect that the tendency for price growth will continue, the selling (the “bears”) actually hold the real power in the market.

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