Bull traps are low-risk, short-term trading opportunities that tempt investors to overleverage their holdings. Unlike a crash, these trades frequently result in financial loss. Bull traps frequently fool traders into thinking the stock is becoming positive when, in fact, it is still falling. They can cause you to lose large sums of money and should be avoided at all costs if you want to maximise your chances of trading success. A bull trap is a pricing pattern used by stocks and other assets to entice traders and long-term investors to open new positions or purchase more of the asset.

Bull traps are known for being false indicators that have disastrous effects for market participants in all markets, which is why they are called "traps." They are, in fact, one of the reasons why traders should be wary of any fast reversal of an asset's price as soon as it completes a breakout, which is a price movement below a support level. Unfortunately, most retail investors, particularly those in the cryptocurrency industry, believe that a breakout will always be followed by a greater price surge, which is not necessarily the case.

Low trading volumes during breakouts are good indicators of bull traps, which arise when bull traders fail to support an asset's upward trend following a resistance breakout. To avoid becoming a victim of a bull trap, constantly evaluate other indicators such as trading volume and future price moves before taking fresh positions following a price breakthrough. Most experienced market participants refer to this as "confirmations," in which a trader examines the movement of an asset during the next time period before deciding whether to open fresh positions.