Friday, February 05, 2010

Bear Trap or Bull Trap

What's the difference between a Bear Trap and a Bull Trap?

A Bear Trap is a false signal that a rising trend of a stock or index has changed when actually it has not. Those who short will lose money when the market resumes its uptrend.

A Bull Trap is a false signal that a downtrend in a stock or index has reversed when actually it has not. Those who buy lose money when the downtrend continues.

Simply put, a BearTrap is a trap to trap the bears, whereas a Bull Trap is a trap to trap the bulls. So you see, whether you are a bull or a bear, you can be trapped.