What is a bear trap in trading?

[erwinsmith]

Have you ever entered a short trade thinking the market was about to fall, only to see prices suddenly reverse upward? That could be a bear trap in trading—designed to catch bearish traders off guard and force losses. Understanding how a bear trap works can help you protect your capital, avoid false breakdowns, and trade with more confidence.

 

[Jonas_Kahnwald]

When stocks or markets show signs of breaking down, the bear trap in trading is a false market signal that leads traders to believe in it and sell or short. However, the stock or market then reverses its direction upward very quickly, thus the traders who bet on a decline are the ones losing the game.

 

[Emly]

A bear trap in trading is a false signal where a stock or market looks like it’s about to fall, luring traders into selling or shorting—then suddenly reverses upward, trapping those bearish traders with losses.

 

[alexmetro]

Yeah, a bear trap is when the price looks like it’s breaking down so people short, but then it quickly reverses up, I’ve fallen for that once, and it taught me to always wait for confirmation before jumping in.

 

[amberbenton]

A bear trap in trading is a misleading technical signal that suggests a bullish trend is reversing. It lures traders into opening short positions, only for the price to quickly move higher. As the uptrend resumes, bearish traders are forced to exit their positions at a loss.