Web Trader MT5
A false breakdown. Price drops below an important support level, triggering bears to short and longs to sell, and then sharply reverses higher, trapping the new shorts and the panic-sellers who joined them. The trap closes when those positions are forced to cover at a loss as price climbs.
What makes bear traps psychologically nasty is that they look exactly like the start of a real breakdown until they don’t. The support level breaks, volume picks up, technical signals turn negative, sentiment shifts. Everyone who follows technical analysis sees the same thing and acts on it. Then the move reverses and all those textbook signals become liquidity for the people who were buying.
Big institutional players are sometimes accused of engineering bear traps deliberately, by absorbing forced selling at lower prices and then driving the recovery. Whether that’s coordinated or just emergent behaviour at scale doesn’t really matter for the trader on the wrong side. The losses are identical either way.
Example: Indian equities in March 2023, when the Adani Group crisis pushed the Nifty briefly below 17,000, a level many traders had flagged as critical support. Shorts piled in expecting a deeper move. The index reversed within days and rallied to fresh highs over the following months, leaving the late shorts caught.
