Bull Trap

DEFINITION of 'Bull Trap'

A false signal indicating that a declining trend in a stock or index has reversed and is heading upwards when, in fact, the security will continue to decline.

BREAKING DOWN 'Bull Trap'

A bull trap often causes some investors to buy the stock, but because the stock continues to decline after the initial signal, those who bought in are "trapped" in a bad investment.

RELATED TERMS
  1. Bear Trap

    A false signal that the rising trend of a stock or index has ...
  2. Value Trap

    A stock that appears to be cheap because the stock has been trading ...
  3. Superiority Trap

    A psychological or behavioral trap that leads people to believe ...
  4. Relativity Trap

    A psychological or behavioral trap that leads people to make ...
  5. False Signal

    In technical analysis, a false signal refers to an indication ...
  6. Liquidity Trap

    A situation in which prevailing interest rates are low and savings ...
Related Articles
  1. Chart Advisor

    Stocks With More Upside Due to Bear Traps (TAP, SPY)

    A bear trap is a pattern that typically leads to at least a short-term rise in prices. Here are stocks exhibiting the pattern.
  2. Investing Basics

    Avoid These Common Investing Psychology Traps

    There are a number of very common psychological traps or errors that investors typically make. You can save a lot of money and misery by avoiding them.
  3. Fundamental Analysis

    Avoid These 3 Value Trap Stocks

    Investors are wise to do their homework and avoid the following companies that might be value traps.
  4. Investing Basics

    5 Methods To Avoid Value Traps

    Learn about five key factors that can help investors identify and avoid value traps in their stock market portfolio selections.
  5. Technical Indicators

    These Red Flags Could Signal A Change In Trend

    Early warning signals allow traders to take action before a change in trend traps the prevailing crowd.
  6. Insurance

    Exploring Oscillators and Indicators: Leading And Lagging Indicators

    By Chad Langager and Casey Murphy, senior analyst of ChartAdvisor.com Indicators can be separated into two main types - leading and lagging - both differing in what they show users. Leading ...
  7. Mutual Funds & ETFs

    Value Traps: Bargain Hunters Beware!

    Find out how to avoid getting sucked in by a deceiving bargain stock.
  8. Active Trading Fundamentals

    Short Selling

    Learn more about this trading strategy where the investor profits from the decline of a stock price.
  9. Insurance

    Exploring Oscillators and Indicators: Market Indicators

    By Chad Langager and Casey Murphy, senior analyst of ChartAdvisor.com The technical indicators that are generally aimed at specific stocks, which were discussed in previous sections, can also ...
  10. Technical Indicators

    The Top Technical Indicators For Commodities Investing

    Traders can use "the usual suspects" (standard indicators for trend trading) when it comes to choosing indicators for investing in commodities. Here's how.
RELATED FAQS
  1. What are the best ways to protect trade positions against false signals?

    Find out why it is important that traders learn to protect themselves against false signals, and read about some of the most ... Read Answer >>
  2. How do experienced traders identify false signals in the market?

    Learn how traders identify false signals in the market when using indicators and strategies to better identify true market ... Read Answer >>
  3. What is a common strategy traders implement when using the Mass Index?

    Learn about the mass index technical indicator and the common market reversal trading strategy that is designed to be utilized ... Read Answer >>
  4. What indicators help define a bull market?

    Learn about a number of various technical indicators traders and analysts use to define and confirm the existence of a bull ... Read Answer >>
  5. What signals do traders watch for that signal a change in a bull market?

    Discover the various signals of bull market tops and what traders and analysts look for as signs of an impending bearish ... Read Answer >>
  6. How are Morning Star patterns interpreted by analysts and traders?

    Understand the elements of the morning star candlestick pattern and how this reversal signal is interpreted by traders and ... Read Answer >>
Hot Definitions
  1. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  2. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  3. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  4. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  5. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center