What is bear trap?

Bear trap is an indication of downward price movement in the market and at the end the price rises up and which leads to high price. During the sudden the price downward movement some bearish investors are tempted to sell their investments short and which is being followed by reversal price upward. During this process short sellers incur losses.

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What is short selling ? This is a situation whereby an investor borrowed a shares from a broker and sell it off with the hope that the price will go down and he will be able to buy the same shares at lower price and make profit from it. And eventually if the price goes up an investor will be forced to buy at higher price thereby making an investor to incur losses.
There are many things that causes the bear trap and one of it is if there is a drop in the key support level or an
Investor got into a short position or there is a drop below the support level is short is being followed by a reversal upward in price.
Nevertheless, there are some ways to avoid the bear trap which are to avoid short positions which means when you notice there is low trade volume there is tendency that there will be a bear trap.
Another way is using buying put option and this is a way of placing bet of a stock with small amount of capital at risk.
Is worthy to note that bear trap is not advisable or not good for a long term investor and also an investor who buy and hold.

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