Definition
A bull trap is a market risk where a brief upward price move appears to confirm a positive trend but quickly reverses, catching optimistic traders on the wrong side. It typically occurs when price action looks like a strong recovery or breakout, encouraging buying just before the asset resumes a downward move. In crypto trading, bull traps are closely tied to shifts in market sentiment, especially when traders are eager to believe that a decline has ended. The trap lies in the false signal that a new bullish phase has begun, when the broader conditions still favor weakness.
Bull traps often show up around key price levels that traders watch for a breakout. When the price briefly moves above such a level, it can resemble a genuine breakout, but the move lacks lasting strength and fails to hold. This pattern is the opposite of a bear trap, where a move downward falsely suggests a deeper decline before reversing higher. In extended bear market conditions, bull traps can be more frequent, as short-lived rallies occur within an overall downward trend.
Context and Usage
The term bull trap is commonly used when discussing failed breakout attempts and misleading price patterns in volatile markets. Traders may describe a move as a bull trap when a breakout quickly loses momentum and falls back into the previous trading range. In conversations about market sentiment, a bull trap is seen as a sign that optimism was premature or not supported by stronger underlying demand. The concept helps frame the risk that apparent strength in price action does not always signal a durable change in trend.
In technical discussions, bull traps are referenced alongside breakouts, bear traps, and broader bear market structures. They highlight the psychological and structural risks that arise when participants interpret short-term price moves as confirmation of a lasting shift. As a risk concept, a bull trap emphasizes the potential for misleading signals in charts and the danger of assuming that every upward move marks the start of a new bullish phase.