A bear trap is where the change in the price of the cryptocurrency incorrectly signals a reversal of the trend, sending a false bearish signal.

Bear Trap Vs. Bull Trap

Both a bear trap and a bull trap are similar as they involve a false signal indicating a break in a trend, then followed by a reversal that returns back to the original (longer-term) trend.

Where bear traps and bull traps differ are in the direction of the trends:

  • Bull Trap: After a downward trend in price, a sudden break upward in the price above a key resistance level sends a false bullish signal, only to be followed by a reversal downward in price.
  • Bear Trap: After an upward trend in price, a sudden break down in price below a key support level sends a false bearish signal, only to be followed by a reversal upward in price.

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