What is a bull or bear trap in crypto trading?
The trading learning curve is steep—and exciting.
There are many terms you'll learn along the way. One of the most common is a bear or a bull trap.
Regardless of what it points to, as the name suggests, both setups are traps.
Traps are meant to stomp traders who anxiously get in ‘too early’ often without pattern confirmation.
A bull trap happens when prices have been in a downtrend for a while. If prices unexpectedly increase in a defined downtrend before sharply reversing, a bull trap would have printed.
Often, bull traps lure aggressive traders who naively load the dips in anticipation of a futile breakout. The breakout never happens, and the price of the trailed digital asset dumps, mirroring the primary trend, burning traders.
A bear trap happens in reverse
This occurs in an uptrend.
Pessimistic traders, anticipating a pullback and correcting what they think is an overvalued asset, often fall into this trade pattern.
When a bear trap prints out, traders would be taking short positions to expect a clearance below a critical support line.
The disappointment is, the breakout is never confirmed, and prices snap back in sync with the primary trend.