Bear Trap

A deceptive market situation in which the price of an asset appears to break below a key support level, enticing traders to open short positions or sell their holdings, only for the price to quickly reverse and rally. Bear traps can occur naturally due to stop-loss hunting around well-known support zones, or they can be engineered by large participants who sell aggressively to trigger a cascade of sell orders before buying back at lower prices. Recognizing bear traps is important for traders to avoid entering short positions on false breakdowns.