What is Bull Trap?

A great example of a bull run in the crypto world happened in &nbsp;<strong>January 2017<\/strong>, when <a href=https://www.bitdegree.org/"https:////www.bitdegree.org//crypto//buy-bitcoin-btc/">Bitcoin's price topped $1,100, hitting a new all-time high. Within a few months, the coin's value had risen to around $20,000 per coin. In less than a year, it became 20 times bigger than before.<\/p>\n<p>Similar to the price increase in 2013, the <strong>price increase in 2017 occurred one year after the Bitcoin halving event<\/strong>. One of the most notable features of this time period was that, for the first time in history, general people became interested in cryptocurrencies. Articles about Bitcoin began to appear in the mainstream media. The <strong>majority of the price increase <\/strong>happened due to the fact that new individual investors entered the market.<\/p>\n<h3>What Is a Bear Trend?<\/h3>\n<p>The bear trend is the opposite of the bull trend. It mostly occurs when the market value drops by more than 20% (though this is just a common way to define it, it&rsquo;s not fixed). Investors are <strong>afraid to sell their assets<\/strong> and lose money as long as the bear market is taking place.<\/p>\n<p>However, there are many people that see bear markets as a way to make money due to the low stock prices. Though this requires <strong>finding the right entry point<\/strong> into the market which might be difficult to do. Besides, timing the bottom is difficult too.<\/p>","definition":"a time period when the prices of certain assets are increasing in the financial market.","status":"published","meta_title":"What is Bull Run? Definition & Meaning | Crypto Wiki","meta_description":"Bull Run meaning: Bull Run - a time period when the prices of certain assets are increasing in the financial market.","meta_keywords":null}" :model="{"id":132,"wikipedia_url":"https:\/\/en.wikipedia.org\/wiki\/Bull_Trap","level":"medium","author_id":1,"created_at":"2023-06-19T06:58:59.000000Z","updated_at":"2023-11-25T10:31:20.000000Z","slug":"what-is-bull-trap","title":"What is Bull Trap?","section":"B","keyword":"Bull Trap","content":"<p><strong>A bull trap is a fake indication in which a trend in a stock, index, or other investment reverses after a compelling rally, and crosses a previous support level. <\/strong>This allures traders and long-time investors to open a new long position or purchase more of the asset.&nbsp;<\/p>\n<p><em>It can also be referred to as a &ldquo;whipsaw pattern&rdquo;.&nbsp;<\/em><\/p>\n<p>Bull traps are untrustworthy because they give misleading signals that have negative effects on users in all markets. That&rsquo;s the main reason it is referred to as a \"trap\". This encourages traders to be extremely careful when they witness a reversal of an asset's price shortly after it completes a breakthrough (a price movement below a support level).<\/p>\n<p>Nevertheless, many optimistic retail investors believe that a breakout will lead to a stronger price comeback, not acknowledging that this doesn&rsquo;t always happen.<\/p>\n<p><strong>For example, the security sells off and hits a new 52 week low until bouncing back rapidly on heavy volume and breaking through trendline barriers.<\/strong> Investors rush in, expecting a break over trendline barriers, but the security turns at resistance and falls dramatically from these levels.<\/p>\n<p>Technical analysis is a highly useful utensil for traders to have. Specifically, it may analyze price trends and identify trade signals on an asset's price chart in order to forecast its future movements.<\/p>\n<p>One of the most critical indicators is a breakthrough over a resistance level (when the price chart moves above a specific line that has previously been achieved but never beyond).<\/p>\n<p>Bull traps happen when traders are unable to sustain an asset's upward trend following a resistance breakout. Low trading volumes during breakouts are fair predictors of this. To avoid falling into a bull trap, constantly keep in mind the trading volume and subsequent price moves before establishing further strategies after a price breakthrough.<\/p>\n<p>Speaking of experienced market users, they always observe and analyze the movement of an asset in the next period of time, prior to deciding whether or not to establish a further strategy. This is called &ldquo;confirmation&rdquo;. Breakouts combined with low trading volume are frequently indicators of an impending bull trap.<\/p>\n<p>A person who is confident that market prices will increase can be referred to as a &ldquo;<a href=https://www.bitdegree.org/"//crypto//learn//crypto-terms//what-is-bull/">bull&rdquo; or &ldquo;bullish&rdquo;. These bullish traders usually assume that the price will increase and stay in the long position with hopes of profiting.<\/p>\n<p>Without the bull trap, there is also the <a href=https://www.bitdegree.org/"//crypto//learn//crypto-terms//what-is-bear-trap/">bear trap<\/strong><\/a>. It is a bit different since it happens when sellers don&rsquo;t press decline below a breakdown level.<\/p>","definition":"happens when a continuously decreasing asset appears to turn and rise, only to quickly revert to its downward trend.","status":"published","meta_title":"What is Bull Trap? Definition & Meaning | Crypto Wiki","meta_description":"Bull Trap meaning: Bull Trap - happens when a continuously decreasing asset appears to turn and rise, only to quickly revert to its downward trend.","meta_keywords":null,"author":{"id":1,"user_id":1,"created_at":"2023-05-03T14:30:55.000000Z","updated_at":"2023-05-11T07:18:20.000000Z","title":"Editor-In-Chief","slug":"aaron-s-editor-in-chief","description":"<p>Having completed a Master&rsquo;s degree on Economics, Politics &amp; Culture for the East Asia region, Aaron has written scientific papers with a comparative analysis of the differences between US&rsquo; Western and Japan&rsquo;s Collective forms of capitalism, 1945-2020.<\/p>\n<p>With close to a decade of experience in the FinTech industry, Aaron understands all of the biggest issues and struggles that crypto enthusiasts face. He&rsquo;s a passionate analyst who is concerned with data-driven and fact-based content, as well as that which speaks to both Web3 natives and industry newcomers.<\/p>\n<p>Aaron is the go-to person for everything and anything related to digital currencies. With a huge passion for blockchain &amp; Web3 education, Aaron strives to transform the space as we know it, and make it more approachable to complete beginners.<\/p>\n<p>Aaron has been quoted by multiple established outlets, and is a published author himself. Even during his free time, he enjoys researching the market trends, and looking for the next supernova.<\/p>","user":{"id":1,"first_name":"Aaron","last_name":"S.","email":"aaron@bitdegree.org","email_sanitized":"aaron@bitdegree.org","email_verified_at":"2023-12-01T09:40:20.000000Z","must_verify_email":false,"is_registered_with_wallet":false,"status":"active","country":"LT","last_connected_ip":"88.119.132.125","image_id":2641,"referral_token":"05TMu2NysXOCn525","referred_by":null,"created_at":"2023-05-03T14:30:55.000000Z","updated_at":"2024-01-09T15:22:21.000000Z","full_name":"Aaron S."}}}" :chapter-list="[{"id":1,"title":"Blockchain","slug":"blockchain","updated":null,"chapter":"crypto\/assets\/crypto-book\/chapters\/learn-blockchain.jpg","chapter_simple":"crypto\/assets\/crypto-book\/chapters-simple\/blockchain-101.jpg","rating":100,"sections":[{"chapter_id":1,"order":1,"slug":"what-is-blockchain","title":"What is the Blockchain?","status":"published","modified_content":null},{"chapter_id":1,"order":2,"slug":"decentralized-blockchain","title":"Anonymous & Decentralized Blockchains: The Cornerstone of Crypto","status":"published","modified_content":null},{"chapter_id":1,"order":3,"slug":"blockchain-transaction","title":"What is a Blockchain Transaction in Crypto?","status":"published","modified_content":null},{"chapter_id":1,"order":4,"slug":"crypto-fees","title":"The Different Types of Crypto Fees Explained","status":"published","modified_content":null},{"chapter_id":1,"order":5,"slug":"what-is-bridging-in-crypto","title":"The Key Notion Behind the Concept of Bridging in Crypto","status":"published","modified_content":null},{"chapter_id":1,"order":6,"slug":"types-of-blockchains","title":"Different Types of Blockchains: What to Look Out For?","status":"published","modified_content":null}]},{"id":2,"title":"Cryptocurrencies","slug":"cryptocurrencies","updated":null,"chapter":"crypto\/assets\/crypto-book\/chapters\/learn-cryptocurrencies.jpg","chapter_simple":"crypto\/assets\/crypto-book\/chapters-simple\/cryptocurrencies-101.jpg","rating":100,"sections":[{"chapter_id":2,"order":1,"slug":"what-is-a-cryptocurrency","title":"What is a Cryptocurrency?","status":"published","modified_content":null},{"chapter_id":2,"order":2,"slug":"how-does-cryptocurrency-work","title":"How Does Cryptocurrency Work?","status":"published","modified_content":null},{"chapter_id":2,"order":3,"slug":"is-cryptocurrency-a-good-investment","title":"Is Cryptocurrency a Good Investment? 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Contracts?","status":"published","modified_content":null},{"chapter_id":6,"order":7,"slug":"what-is-a-dao-in-crypto","title":"The Notion of a Decentralized Autonomous Ogranization (DAO)","status":"published","modified_content":null},{"chapter_id":6,"order":8,"slug":"what-is-staking-in-crypto","title":"What is the Goal of Staking Crypto Assets?","status":"published","modified_content":null},{"chapter_id":6,"order":9,"slug":"what-is-liquidity-pool-in-crypto","title":"What is a Liquidity Pool and How Does It Work?","status":"published","modified_content":null},{"chapter_id":6,"order":10,"slug":"what-is-automated-market-maker","title":"Automated Market Maker: the Cornerstone of the Decentralized Crypto Exchange Industry","status":"published","modified_content":null},{"chapter_id":6,"order":11,"slug":"what-is-yield-farming-in-crypto","title":"The Main Yield Farming 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Mining?","status":"published","modified_content":null},{"chapter_id":9,"order":3,"slug":"what-is-staking-crypto","title":"An Advanced Look into What is Staking Crypto","status":"published","modified_content":null},{"chapter_id":9,"order":4,"slug":"what-is-proof-of-stake-vs-proof-of-work","title":"Proof-of-Work VS Proof-of-Stake: The Differences That Matter","status":"published","modified_content":null},{"chapter_id":9,"order":5,"slug":"what-is-crypto-mining-rig","title":"Crypto Mining Rig: What It is and How to Build One?","status":"published","modified_content":null}]},{"id":10,"title":"Crypto Terms","updated":false,"chapter":"crypto\/assets\/crypto-book\/chapters\/crypto-101-glossary.jpg","chapter_simple":"crypto\/assets\/crypto-book\/chapters-simple\/crypto-glossary-101.jpg","rating":100,"sections":["A","B","C","D","E","F","G","H","I","J","K","L","M","N","O","P","Q","R","S","T","U","V","W","X","Y","Z"]}]" current-chapter="B" current-section="what-is-bull-trap">