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Investment
Bull Trap
A false signal that a downtrend has reversed and the market is going up again — but it quickly falls back down.
Bull traps happen because of short covering, fake breakouts, or temporary good news. Technical analysts watch volume and support levels to avoid them. The best way to avoid bull traps is to wait for confirmation before buying.
It's when the bull charges forward for a few steps, gets everyone excited, then turns around and runs the other way.
Real world: In a bear market the price suddenly jumps 15% on good news. Many traders buy thinking the bottom is in (bull trap). Then the price crashes again, trapping them in losing positions.
💡 Bull traps punish impatient buyers — patience saves money in downtrends.