Bull Traps and Bear Traps Explained

Bear traps and bull traps are price moves that fool traders into going the wrong way in the market. When the price breaks above a resistance level, it gives the appearance of a rising trend. This is called a bull trap. Traders purchase because they think the price will go up, but it swiftly goes down, which causes them to lose money. When the price drops below a support level, it might indicate that the market is going down. Traders sell or short the market, but the price quickly goes back up. These traps happen most of the time when things are unstable. Traders may avoid false breakouts and make smarter trading choices if they know how to spot bull and bear traps.