Bear Trap

A bear trap is a false breakdown pattern in which an asset's price drops below a key support level, signalling a potential downtrend, then quickly reverses and pushes back upward. Traders who shorted the move or sold their position are caught on the wrong side as price recovers, resulting in losses. Bear traps appear across stocks, commodities, and cryptocurrency markets, and they tend to cluster around well-watched support levels where many participants place the same stop-loss and short orders simultaneously.

Larger market participants sometimes set bear traps deliberately: by briefly pushing price below support, they flush out smaller traders and accumulate inventory at a discount before allowing price to rise again. The key warning signs are a fast breakdown candle on low volume, a lack of momentum confirmation, and a swift close back above the broken level. Waiting for a confirmed candle close below support, rather than reacting to an intrabar move, is the most reliable way to avoid being caught. For a deeper breakdown, see our full guide on bear traps.