A bull trap occurs when a price move appears to support further gains but then reverses downward, catching traders who bought on that expectation. It commonly involves a failed breakout above resistance or a convincing rebound within a broader decline. “Trap” describes the outcome for bullish participants; it does not by itself prove deliberate manipulation.
How buyers become caught
Suppose a token repeatedly struggles near 20, rises to 21, and attracts buyers expecting a sustained breakout. If it then falls back below 20 and reaches 18, those buyers face losses instead of the anticipated continuation. The example describes a failed upward move, not a rule that every return below resistance becomes a bull trap.
Fading demand, profit-taking, or new information can contribute. Leverage can magnify the damage, although a bull trap can affect ordinary spot buyers too.
Recognizing failure takes context
Traders may examine whether a candle closes above resistance, whether volume supports the move, and whether a later retest holds. These observations cannot eliminate false signals.
A brief pullback can also precede renewed gains. The timeframe and subsequent price action matter, and the completed trap is often clearer afterward than at the moment of entry.