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Bear Trap

A Bear Trap occurs when an asset’s price drops and provides traders with a false bearish signal.

Beartraps entice market participants to sell, or go short, expecting that the amount will continue to fall even further.

These situations are called traps because the drop proves to be just temporary, at which point it begins to rise to former levels, causing everyone who sold or went short of incurring substantial losses and/or receive margin calls.

Bear traps, like everything else in trading, are exacerbated by the use of leverage.

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Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73,74% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Please consider our Risk Disclosure