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Bear Trap

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Definition of 'Bear Trap'

A Bear Trap is a false trading signal during the upward trend of a security that indicates that the stock, future, commodity, currency or index has reversed the trend and is now heading down. However, because the signal is false the security will continue on its upward path.

The bear trap signal will cause some traders to sell the security but when it continues to rise they will be "trapped" in their position not wanting to take a loss and may end up holding on to the position.

A bear trap is the opposite of a bull trap.

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