A bear trap is a downward move that appears to confirm weakness but then reverses upward. Traders who sell or open short positions expecting continued decline can be caught by the recovery. A common example is a brief break below support followed by a return above that level.
Who is trapped
Imagine a token trading above support near 50. It falls to 48, prompting new shorts, then recovers through 50 to 54. Short sellers who close higher incur losses, while spot holders who sold during the drop may miss the rebound or pay more to repurchase.
Buying to close short positions can reinforce the recovery, but a short squeeze is not required for a bear trap. Nor does the word imply that a coordinated group intentionally engineered the move.
Separating a false break from a downtrend
A recovery above the broken level may undermine the original bearish interpretation. Traders often examine closing prices, follow-through, volume, and the wider trend rather than one downward wick alone.
Those observations remain imperfect. A temporary recovery can itself fail, and a genuine breakdown may continue lower. The chosen support zone and timeframe determine which movement is being assessed; the label does not promise an enduring rally.