In simple terms
In trading language, a trap is an apparently favorable signal that is invalidated, potentially leaving traders who acted on it exposed on the wrong side. It is an umbrella word, not a single chart pattern with universal rules.
How the term is used
It is more precise to name the signal that failed. A bull trap involves an invalidated bullish signal; a bear trap an invalidated bearish signal. Fakeout emphasizes the false break of a level.
The term describes an observed sequence and its possible effect on positions. It does not prove that someone intentionally engineered the move.
Limit
Calling every losing trade a “trap” adds no useful information. The term becomes meaningful only when the initial level or signal, the invalidation, and the timeframe are specified.
Sources
- CMT Association, P&F Traps: Rules That Define Weakened Bulls & Bears — distinguishes bull and bear traps and links them to a prior signal that is quickly reversed.
- Investor.gov, Market Manipulation — defines manipulation as artificially affecting supply or demand, which is distinct from observing a chart pattern alone.