Market Traps: Bull Traps, Bear Traps, and How to Spot Them Early
Market traps are fakeouts engineered by liquidity and order flow. They look like real breakouts or breakdowns but reverse violently, leaving retail traders wrecked. If you learn the tells, you’ll stop donating money every time the market “fakes you out.”
What Is a Bull Trap?
A bull trap happens when price breaks above a key level, attracts breakout buyers, and then slams back down because the breakout had no real demand behind it.
| Trait | Meaning |
|---|---|
| Breaks above resistance | Triggers breakout orders |
| Fails instantly | No follow-through |
| Sharp reversal | Sellers take control |
What Is a Bear Trap?
A bear trap is the opposite — price breaks below support, sucks in shorts, and then rips upward because sellers were weak or trapped.
| Trait | Meaning |
|---|---|
| Breaks below support | Triggers sell stops |
| Fails quickly | No continuation |
| Aggressive rally | Buyers reclaim control |
Why Traps Happen
Traps form because the market hunts liquidity. The area right beyond a key level is full of stops and breakout orders. The market fills them, then reverses into the real direction.
This directly ties into Liquidity Levels.
Tells That a Trap Is Forming
1. Weak Momentum on Breakout
If a breakout travels only a few ticks and hesitates, momentum isn’t backing it.
2. Heavy Absorption
Large orders absorb the move without price progressing.
3. Immediate Rejection Wick
Price pokes the level and instantly slams back inside.
4. Wrong Sector or Index Leading
If the breakout is happening but leadership is weak, odds of a trap skyrocket. (See Relative Performance)
Trap Behavior in Trend Days
Traps in trend days are usually shallow and quick — they grab stops then resume the trend.
- Buy traps → shallow pullback in trend
- Sell traps → shallow rally in downtrend
Trap Behavior in Range Days
Ranges are trap factories. Every breakout attempt is likely a trap unless momentum or rotation supports it.
- Both edges are liquidity magnets
- Failed breakouts are common
- Expect reversals off both extremes
How to Trade Around Traps
1. Don’t Chase First Breakouts
The first attempt at a breakout is usually the worst entry.
2. Wait for Follow-Through
If follow-through is weak, you’re likely in trap territory.
3. Fade Only With Confirmation
A wick is not confirmation. A wick + failed follow-through + opposite aggression is confirmation.
4. Target Liquidity Pockets
After a trap, the market almost always travels to the opposite liquidity pocket.
The Bottom Line
Traps ruin beginners because beginners chase breakouts blindly. If you learn the tells — slow momentum, absorption, weak leadership, and immediate rejection — you can avoid getting caught and start trading on the side that’s trapping everybody else.