Bull Trap Risk describes the potential for a deceptive market recovery that entices buyers, only for prices to subsequently decline to new lows. This phenomenon occurs when a temporary price increase appears to signal an end to a downturn, encouraging investors to purchase assets. However, this upward movement lacks sustainable buying pressure and quickly reverses. It is a significant concern for traders during periods of market uncertainty.
Context
News articles often highlight bull trap risk during volatile market conditions, especially after significant price drops. Analysts frequently caution against interpreting minor price bounces as definitive trend reversals to prevent investor losses. Understanding this risk helps market participants avoid premature re-entry into a declining market. Identifying a bull trap is critical for preserving capital and making informed trading decisions in digital asset markets.
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