Bull trap
Family VI · Charts & indicators
Not to be confused with bear trap, bull market.
Bull trap is a chart pattern that lures bullish traders into opening long positions by briefly pushing price above a well-defined resistance level, only for the price to reverse and close back below it. The move above resistance appears to signal a breakout, but it fails to hold, trapping late buyers who entered on the breakout. The pattern is confirmed once price closes back below the former resistance level.
How a bull trap forms
A bull trap typically develops after a period of consolidation or a downtrend, when price approaches a resistance level that has previously rejected advances. Buyers anticipating a breakout place orders above that level, and a brief push higher triggers those orders. If the buying pressure is not sustained, sellers step in and drive price back below resistance, leaving breakout buyers with losses. The trap is complete when price closes below the resistance level on the same or subsequent bar.
Worked example
Identifying and avoiding bull traps
Bull traps are easier to avoid with confirmation. Traders often wait for a daily close above resistance, or for a retest of the breakout level that holds as support, before entering. Volume can also help: a breakout on low volume is more likely to fail. Stop-loss orders placed just below the breakout level limit damage if the trap triggers. No method eliminates the risk entirely, because any breakout can fail.
Often confused with
- bear trap
- A bear trap is the mirror image: price breaks below support, lures sellers, then reverses back above support, trapping shorts rather than longs. The visible sign is the direction of the false break: below support for a bear trap, above resistance for a bull trap.
- bull market
- A bull market is a sustained period of rising prices across a broad market, lasting months or years, whereas a bull trap is a brief false breakout that fails within hours or days. The visible sign is duration and breadth: a bull market shows a long series of higher highs, while a bull trap shows a single failed push above resistance.
See also
- forex technical analysis indicators
- price action
- fundamental analysis
- support and resistance
- technical analysis
- fibonacci