Finance glossary
Bear Trap
Definition
A false signal that a rising market is about to reverse and fall.
A bear trap occurs when a security's price appears to break down and reverse into a downtrend, tempting short sellers and bearish traders to act, only for the price to snap back upward. It traps traders who bet on further declines, forcing them to cover losing short positions and often accelerating the very rally they tried to bet against.
In a sentence
After the stock dipped below its support level and quickly rebounded, traders realized it had been a classic bear trap.
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