What is a bear trap and how does it work? Back to list

Member SinceMar 07, 2022

Posts 266

Seamans

Sep 21, 2022 a 02:54
The bear trap is a sudden downward price movement that entices bearish investors to sell an investment short, followed by a price reversal back upward. As prices rise, short sellers lose money, which may trigger a margin call or force them to cover their position by buying back borrowed shares.
Bear traps are caused by a drop in price below a key support level, not just downtrends. A break downward through a resistance level is expected to result in further downward movement by bearish investors or traders. After the price reversal back upward, they are "trapped" and lose money.

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