Bear Trap

A bear trap in the cryptocurrency market is a false signal that lures investors into selling their positions or shorting the market, only to see prices rebound sharply, trapping the bears in losing positions.

This phenomenon occurs when the market experiences a brief downward movement, leading to a sell-off by bearish investors who anticipate further declines. However, the market quickly reverses course, often triggered by positive news, increased buying pressure, or short-covering by traders who had previously sold short. The sudden price surge can cause significant losses for those who had entered short positions or sold their holdings based on the false bearish signal. Bear traps highlight the importance of thorough market analysis, risk management, and the recognition of potential false signals before making trading decisions.

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