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. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, ...
  2. Indicator

    Indicators are statistics used to measure current conditions ...
  3. Capitulation

    When investors give up any previous gains in stock price by selling ...
  4. Falling Knife

    A slang phrase for a security or industry in which the current ...
  5. Bear Market

    A market condition in which the prices of securities are falling, ...
  6. Bear Trap

    A false signal that the rising trend of a stock or index has ...
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. Mutual Funds & ETFs

    The 3 Best Downside Protection Equity Mutual Funds

    Learn how it is possible to profit in a bear market by owning the correct selection of mutual funds that provide downside protection and opportunity.
  5. Investing News

    Market Outlook: No Bottom Until 2017?

    These investing pros are bearish on the market in 2016. Will there be a bottom in early 2017?
  6. Your Clients

    How Advisors Can Make the Most Out of Volatility

    Advisors can use market volatility as an opportunity to enhance their value to their clients and grow their practice. Here's how.
  7. Chart Advisor

    3 Charts That Suggest Now Is The Time To Invest In Real Estate (VNQ, SPG,PSA)

    Real estate assets have some of the strongest uptrends around. We'll take a look at three candidates poised for a move higher.
  8. Investing News

    With Short Interest Surging, Is it Time to Buy?

    What do you think the smart money is doing when the market moves higher? Apparently, they're building short positions.
  9. 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.
  10. Saving and Spending

    A Key Tip for Making Your Nest Egg Last Longer

    Retirees who don't want to deplete their nest eggs during a bear market should make sure to do the following.
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. What is Fibonacci retracement, and where do the ratios that are used come from?

    Fibonacci retracement is a very popular tool among technical traders and is based on the key numbers identified by mathematician ... Read Full Answer >>
  4. What are some of the most common technical indicators that back up Doji patterns?

    The doji candlestick is important enough that Steve Nison devotes an entire chapter to it in his definitive work on candlestick ... Read Full Answer >>
  5. Tame Panic Selling with the Exhausted Selling Model

    The exhausted selling model is a pricing strategy used to identify and trade based off of the price floor of a security. ... Read Full Answer >>
  6. Point and Figure Charting Using Count Analysis

    Count analysis is a means of interpreting point and figure charts to measure vertical price movements. Technical analysts ... Read Full Answer >>
Hot Definitions
  1. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  2. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  3. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  4. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  5. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  6. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
Trading Center