Bull Trap / Bear Trap
Faking a rise then falling is a bull trap; faking a fall then rising is a bear trap — false signals that look like a trend reversal.
In plain terms
A bull trap is the price poking up as if "now it rises!" then, having trapped those who bought in, falling again. A trap of being fooled by the bull (the rise).
A bear trap is the opposite. It dips down as if "now it falls!" to scare you into selling, then soon rises again, taunting those who sold. A trap of being fooled by the bear (the fall).
What it tells you
These phrases tell you that "a signal that looks like a trend reversal can be false." Believing a brief breakout or breakdown is a real reversal and following it easily gets you hit the opposite way.
So rather than hastily following one breakout/breakdown, it teaches you to check whether that move is confirmed by volume or time.
Formula
bull trap = looks like an upside breakout luring buyers, then falls (buyers trapped) bear trap = looks like a downside breakdown luring sellers, then rises (sellers trapped)
What high or low means
A breakout/breakdown on weak volume is seen as possibly a trap. A real trend reversal usually happens with volume behind it.
But whether it is real or a trap is clear only in hindsight. So the key is not blindly trusting "one signal."
Trading on a single chart breakout/breakdown easily gets you trapped. A signal that briefly moved without volume in particular may be a fakeout. (This is a concept explainer, not a suggestion of a specific trade.)
Declaring "it's a trap" in advance is also risky. Mistaking a real reversal for a trap can make you miss an opportunity, so in the end watch the flow rather than one signal.
Metrics to read alongside
See it in real stocks
Search US stocks on Stocklore to see Bull and other financial metrics alongside the sector average.
This explanation is for information and reference only and is not a recommendation to buy or sell any security. Investment decisions and their consequences are your own.