In stock market trading, a bull trap is an inaccurate signal that shows a
decreasing trend in a
stock
Stocks (also capital stock, or sometimes interchangeably, shares) consist of all the Share (finance), shares by which ownership of a corporation or company is divided. A single share of the stock means fractional ownership of the corporatio ...
or
index
Index (: indexes or indices) may refer to:
Arts, entertainment, and media Fictional entities
* Index (''A Certain Magical Index''), a character in the light novel series ''A Certain Magical Index''
* The Index, an item on the Halo Array in the ...
has reversed and is now heading
upwards, when in fact, the security will continue to decline.
It is seen as a trap because the
bullish investor purchases the stock, thinking it will increase in value, but is trapped with a poor performing stock whose value is still falling.
See also
*
Boom and bust
Business cycles are intervals of general expansion followed by recession in economic performance. The changes in economic activity that characterize business cycles have important implications for the welfare of the general population, governmen ...
*
Dead cat bounce
*
Economic bubble
An economy is an area of the Production (economics), production, Distribution (economics), distribution and trade, as well as Consumption (economics), consumption of Goods (economics), goods and Service (economics), services. In general, it is ...
*
Market trend
A market trend is a perceived tendency of the financial markets to move in a particular direction over time. Analysts classify these trends as ''secular'' for long time-frames, ''primary'' for medium time-frames, and ''secondary'' for short time ...
*
Speculation
In finance, speculation is the purchase of an asset (a commodity, good (economics), goods, or real estate) with the hope that it will become more valuable in a brief amount of time. It can also refer to short sales in which the speculator hope ...
*
Stock market bubble
A stock market bubble is a type of economic bubble taking place in stock markets when market participants drive stock prices above their value in relation to some system of stock valuation.
Behavioral finance theory attributes stock market bubb ...
References
Setting the Bull Trap (investorinsight.com)
Behavioral finance
Business cycle
Stock market
Financial crises
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