A bull trap is where the change in the price of the cryptocurrency incorrectly signals a reversal of the trend, sending a false bullish signal.
A bull trap is a term which comes from technical analysis and also has it's opposite counterpart, a bear trap.
Bull Trap Vs. Bear Trap
Both a bull trap and a bear trap are similar as they involve a false signal indicating a break in a trend, then followed by a reversal which returns back to the original (longer-term) trend.
Where bull traps and bear traps differ are in the direction of the trends:
- Bear Trap: After an upward trend in price, a sudden break downward in price below a key support level sends a false bearish signal, only to be followed by a reversal upward in price.
- 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.