A bear trap is a situation in which investors are led to believe that the price of a cryptocurrency is going to rise, only to have the price drop shortly thereafter.
Bull trap vs bear trap: what's the difference? Whereas a bull trap traps buyers in a losing trade, a bear trap traps sellers or short sellers in a losing trade. A bear trap typically occurs during an overall uptrend.
A bear trap is a technical pattern in which price action creates the impression that the market is about to go down, causing other investors to sell their positions. Once the selling pressure is strong enough, the bear trap is sprung, and the market turns around, leaving those who sold at a loss.
A bull trap is also known as a “whipsaw pattern,” and refers to a false signal where a value of a stock, cryptocurrency, or any other kind of financial asset, displays a sign of recovery or reversal after a downtrend when in reality, the asset is actually set to decline further.
Are we in a bull market now? Using the basic, 20% definition and applying it to the blue-chip S&P 500 index, you could conclude that we are, in fact, in a bull market now. As of July 24, 2023, the index had risen more than 20% over its lows from the prior year.
Bull Trap. A bull trap is when an overall downward trend and a short-term bullish—or upward—trend in price occurs. Like a bear trap, this short-lived uptrend can trick traders into positions that can cause losses.
For a bear trap chart example, consider a scenario where traders were watching a key support level of $425 on the SPDR S&P 500 ETF (SPY), a US stock market proxy. Thinking that a break below this support was a bearish signal, some traders shorted stocks. However, the price reversed, causing short sellers to lose money.
The idea behind calling this type of trading pattern a bear trap is that bearish investors are sitting and waiting for prices to fall so they can jump in and profit from short positions, but instead they are trapped when prices reverse course and head higher.
Another way to spot a bull trap is to look for divergence between a stock's price and momentum indicators like MACD and RSI. Divergence occurs when the stock price is moving upward, but MACD and RSI are still trending downward.
Bear traps are price movements that can trick an unwary trader into losing money. They tempt short sellers to bet that the price of a stock will go down, when in reality it is going up.
“What would a bear trap do to a human? — A bear trap would do enough damage to a human leg to allow the victim to easily sever whatever remains stuck in the trap in order to get free. A farmer who got his hand caught in a trap and after 2 days of being held fast, he took out his pocket knife and cut held body part.”
Buy the dip
It's the most beloved strategy for a bear market. Many investors hold back a reserve of stablecoins or fiat currency for the sole purpose of buying crypto assets while the price is down. It simply refers to the practice of buying a given amount of cryptocurrency when the market is sufficiently bearish.
In a crypto bear market, investors are fearful. Confidence is low, and both prices and demand are sinking. Nobody likes a bear market, but it can also present buying opportunities once the dust settles.
Bull markets are characterized by sustained price increases. As such, more investors have faith in the sustained uptrend and are more willing to take risks. By contrast, declining prices in a bear market also come with less investor confidence.
Bear traps consist of two steel jaws, two leaf springs and a trigger in the middle, usually a round pan. When an animal steps onto the trigger, the jaws snap shut on its leg; the animal is unable to escape. The more the animal struggles, the more the trap's springs tighten the jaw.
In falling markets, traders need to be on the lookout for what are called “bull traps.” A bull trap refers to a short-term rally during a downtrend that “traps” the bulls who mistook it for the start of a new uptrend. Short-term rallies are actually pretty common within bear markets.
A bull trap is a false signal, referring to a declining trend in a stock, index, or other security that reverses after a convincing rally and breaks a prior support level. The move "traps" traders or investors that acted on the buy signal and generates losses on resulting long positions.
Live trap styles vary greatly – culvert traps and barrel traps are still widely used. Traps must be child/bear-friendly and family units must be live trapped and released together.
You should note that in the U.S., anyway, bears are now considered game animals, so they can't be trapped, just hunted. They are still trapped in box type traps by game agencies in order to move bears that have become a nuisance, but the leg hold “bear traps” are not used for that.
A bull market is a sustained stretch of time when investment prices are rising in a financial market. A bear market is a sustained stretch when investment prices are falling. The market imagery of bulls and bears dates back to at least the 18th century.
It's common for individual investors to get spooked by bear market headlines and suffer from loss aversion bias, where losses loom larger than gains. However, over the long term the market usually does well. Bull market growth has historically been longer and more sustained than bear market periods of decline.
Bulls Power measures the capability of buyers in the market, to lift prices above an average consensus of value. Bears Power measures the capability of sellers, to drag prices below an average consensus of value. Using them in tandem with a measure of trend allows you to identify favourable entry points.