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Bull Trap

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Definition of 'Bull Trap'

A Bull Trap is a false trading signal during the decline of a security that indicates that the stock, future, commodity, currency or index has reversed the trend and is now heading upwards. However, because the signal is false the security will continue to decline.

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

A bull trap is the opposite of a bear trap.

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