Bull Trap — Trading Wiki

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Published by TradeHQ. Site creator: Anuga Weerasinghe. This page has no recorded editorial review date; the About page explains the site's editorial approach.

What Bull Trap means

A retrospective label for a move above selected resistance followed by a downward reversal. The pattern alone does not establish buyers’ losses or anyone’s intent.

In depth

A bull trap is a retrospective label for a price move above a selected resistance area that subsequently reverses below it. The apparent breakout can encourage purchases, but a chart alone cannot establish buyers’ motives or a deliberate attempt to trap them. Definitions of resistance, breakout and reversal depend on the interval and tolerance used. At the moment of the initial break, the subsequent reversal is unknown. A study should define its criteria before looking ahead, include successful continuations as well as reversals and compare realistic fills and costs.

No pattern label guarantees that an intended stop can execute at its trigger price.

Key points

• False breakout above resistance that reverses quickly
• Define the resistance area and reversal window before counting examples or claiming a frequency
• Confirmed when price closes back below the broken resistance

Why it matters when you are learning

Record both a breakout and its later reversal using fixed definitions. A confirmation filter changes the rule being tested; it cannot remove every failed signal.

Worked exercise and its limits

Mark a hypothetical prior high at $50, a move to $52 and a later return to $49. The label describes the later reversal; it was not known at $52. Compare losses with alternative fills and fees rather than assuming a perfect exit.