What is a Bear Trap?
A bear trap occurs when the market appears to be entering a downward trend, and traders start selling their assets to avoid losses. However, instead of continuing to decline, the market suddenly reverses and begins to rise again, trapping the bearish traders who sold their assets in anticipation of a further drop.
One of the main reasons why bear traps occur is due to market manipulation by large players such as institutional investors or hedge funds. They can create a false sense of bearish sentiment by selling large quantities of a particular asset, which causes smaller traders to panic and start selling as well.
Once these smaller traders have sold their assets, the large players can then start buying them back at a lower price, which drives up the market price and causes the bearish traders to incur significant losses.
