Bear trap

How it plays out

• Price trades in a range with clear support.
• A candle breaks below support; stops and new shorts trigger.
• Selling dries up; price closes back inside the range within a few candles.
• Trapped shorts buy to cover, and the move up accelerates.

Clues it may be a trap

Low volume on the breakdown, a long lower wick on the breaking candle, and bullish divergence on momentum indicators all suggest the sellers lack conviction. Waiting for a candle close below support — rather than an intraday poke — filters many traps.

Liquidity plays a part too: stops clustered just under an obvious support line are resting sell orders, and a quick dip that fills them gives larger buyers the liquidity they wanted.

Trap versus real breakdown

A real breakdown usually retests the broken support from below, fails to reclaim it, and continues lower on rising volume. A trap reclaims the level fast. Neither is known at the moment of the break, so traders size for the chance of being wrong.

On BRVX

On BRVX a short can be opened on any of the 41 markets, which is exactly why traps catch people there too. A stop-loss above the reclaimed support, attached when the short is opened, turns a trap from an open-ended loss into a planned one.