Bull Trap

A bull trap is a deceptive market phenomenon that occurs when asset prices temporarily rise, luring investors into buying positions based on the belief that a bullish trend is emerging, only for prices to reverse and decline shortly after, trapping the bulls in losing positions.

Bull traps often occur in volatile markets or during periods of uncertainty, where sudden price spikes create a false impression of a bullish trend. Traders who fall into the trap may buy assets at inflated prices, expecting further gains, only to experience losses when prices unexpectedly reverse direction. Bull traps can be triggered by market manipulation, false signals, or sudden shifts in sentiment, leading to significant losses for unsuspecting investors. Recognizing and avoiding bull traps requires careful analysis, risk management, and a disciplined approach to trading to mitigate the risks associated with deceptive market movements.