In simple terms
A bull trap occurs when price rises through resistance and appears to begin an advance, but then moves back below the level. Traders who bought or opened long positions on the break may be left on the wrong side of the move.
It is not every decline after a rally: the “trap” involves a bullish signal that is invalidated. It is the opposite of a bear trap.
How to recognize it
The essential sequence is an observed level, an upside break, failure to continue, and a move back below the level. There is no universal distance or time threshold: both depend on the market, timeframe, and rule used to define the breakout.
The label describes what price did and who may have been trapped. It does not automatically identify who caused the move.
Limit
A bull trap is recognized only after the break has failed. It does not guarantee a subsequent decline, and it is not evidence of manipulation by itself.
Sources
- CMT Association, P&F Traps: Rules That Define Weakened Bulls & Bears — connects bull and bear traps with the failure of a previous signal or breakout.
- CME Group, Support and Resistance — explains levels and breaks while noting that support and resistance are zones, not guaranteed prices.