Bull Trap

What is a bull trap?

A bull trap is a situation in a financial market where a trader or group of traders buy heavily, giving the illusion that a bull market is occurring in that asset.

Other traders who are fooled by the bull trap will then buy the asset at greatly inflated prices, believing that the bull market will continue and prices will go much higher.

In the meantime, those who set the bull trap sell their assets at the higher prices, which often means the newer investors are left holding assets which are declining rapidly in price.