What’s bull trap

A bull trap is a false signal in the stock market that suggests a reversal in a downtrend, leading investors to believe that it's a good time to buy. This occurs when bulls fail to support a rally above a breakout level, causing the stock price to retreat and continue its downtrend. Bull traps can be psychologically driven, as they rely on traders' and investors' reactions to the initial breakout and subsequent reversal. Recognizing warning signs, such as low volume breakouts and divergent price patterns, can help investors avoid getting caught in a bull trap.