Bull Trap

AAA

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.

INVESTOPEDIA EXPLAINS '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. Indicator

    Indicators are statistics used to measure current conditions ...
  2. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, ...
  3. Falling Knife

    A slang phrase for a security or industry in which the current ...
  4. Capitulation

    When investors give up any previous gains in stock price by selling ...
  5. Bear Trap

    A false signal that the rising trend of a stock or index has ...
  6. Bear Market

    A market condition in which the prices of securities are falling, ...
RELATED FAQS
  1. Are we in a bull market or a bear market?

    A bull market is represented by a rising price trend, and a bear market is indicated by a falling price trend. Given this ... Read Full Answer >>
  2. Where did the bull and bear market get their names?

    First of all, let's remember that bears are sluggish and bulls spirited and burly. The terms are used to describe general ... Read Full Answer >>
  3. How can I use an out-of-the-money put time spread for downside risk?

    Long Put Calendar Spread An out-of-the-money put time spread can hedge downside risk by selling an out-of-the-money put ... Read Full Answer >>
  4. How can I spot trading opportunities looking at year-to-date (YTD) performance?

    Trading opportunities on the long side can be spotted by looking at stocks with the worst year-to-date (YTD) performance, ... Read Full Answer >>
  5. How does Net Operating Profit After Tax give a clearer view of the operating efficiency ...

    Net operating profit after tax (NOPAT) gives a clearer view of the operating efficiency of a company. While NOPAT is a measure ... Read Full Answer >>
  6. Which is better: dollar cost averaging or value averaging?

    Historical comparisons seem to indicate that value averaging (VA) tends to outperform dollar cost averaging (DCA), offering ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Stock Basics Tutorial

    If you're new to the stock market and want the basics, this is the tutorial for you!
  2. Active Trading Fundamentals

    Digging Deeper Into Bull And Bear Markets

    Discover why it's important to know the characteristics of the two types of market conditions.
  3. Active Trading

    The Dead Cat Bounce: A Bear In Bull's Clothing?

    Make sure you know the difference between a change in market outlook and short-term recovery.
  4. Chart Advisor

    3 Ways To Trade The Bounce In Coal

    News from the Supreme Court has caused active traders to turn their attention to the coal markets. We'll take a look at how to trade the bounce.
  5. Chart Advisor

    How Investors are Profiting from Cyber Crime Fear

    An ETF that has seen significant gains this year in the growing field of cyber security, and the threat and fear of cyber attacks and cyber crime.
  6. Chart Advisor

    Buy These Stocks on The Pullback

    These four stocks are in upward sloping trend channels and have recently pulled back toward the bottom of the channel, providing a buying opportunity.
  7. Technical Indicators

    Using Bullish Candlestick Patterns To Buy Stocks

    These five popular candlestick chart patterns signal a bullish reversal in downtrend.
  8. Chart Advisor

    3 Ways To Trade Oil's Move Lower

    The spot price of oil is facing major resistance. We'll take a look at a few products that you can see to profit from the move.
  9. Trading Strategies

    Profitable Long-Term Consolidation Patterns

    Long-term consolidation patterns set up high reward opportunities for patient market players.
  10. Charts & Patterns

    Debunking 8 Myths About Technical Analysis

    Investopedia exposes a few common myths about technical analysis.

You May Also Like

Hot Definitions
  1. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  2. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  3. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  4. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
  5. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. Promoting global monetary and exchange stability. 2. Facilitating ...
  6. Risk-Return Tradeoff

    The principle that potential return rises with an increase in risk. Low levels of uncertainty (low-risk) are associated with ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!