Bear Trap

Bear Trap refers to false market signals with misleading indicators that justify the first impression its name makes.

Technical Analysis and Bear Trap

Technical analysis is one of the most important methods used by short and medium-term investors. It relies on investors to analyze price patterns on that crypto asset’s price chart. Later, they find trading signals to try to predict the future movements of the respective cryptocurrency.

One of the results that should be cared about is a breakout when the price goes above or below a certain trend line that has been repeatedly reached but never crossed before. While this assessment is sometimes correct, when the signal turns out to be false, traders are trapped in trading based on the misleading signal. Technical analysts look for confirmation of the course of the price trend by considering multiple indicators to manage these risks.

See the bear market season definition as well.

Bear Trap

The situation we call the bear trap is when the market is in an upward trend, the price of the relevant cryptocurrency shows a rapid decline below the support line, creating the perception that a bear market has started. Thus, this perception can lead to wrong investment movements.

The investor can sell the crypto asset to buy it again later with this perception of the bear trap. Then, when the market returns to the trend, the investor realizes that he has made an unconfirmed transaction. According to this term, investors who sell this cryptocurrency are called “trapped” because they make trades based on the misleading signal.

What Should be Done Against Bear Trap?

Before making a hasty decision about your investments, you should review the market conditions and not take any sudden action. Otherwise, you are very likely to incur losses. Make sure that the market is not in a misleading effect. You may be facing a “bear trap”.