Bear Trap

Business, Legal & Accounting Glossary

Definition: Bear Trap



Full Definition of Bear Trap


A bear trap occurs when a declining market reverses direction, catching short-sellers off guard. In a bear trap short-sellers, who have continued selling in anticipation of a further drop in a now-bullish market, are eventually forced to buy back stock at a higher price to cover their positions. A bear trap can also be created by a temporary downturn in an otherwise bullish market, tricking short-sellers into stepping into the bear trap just before prices again begin rising. Obviously, short-sellers wish to avoid the bear trap. The bear trap primarily exists due to the difficult nature of market timing. If short sellers had a way of knowing with certainty that a bearish market had turned bullish, the bear trap could be easily sidestepped. Unfortunately, such market timing is difficult at best, leaving many short sellers at the mercy of the bear trap with each market swing.


Cite Term


To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
https://payrollheaven.com/define/bear-trap/
Modern Language Association (MLA):
Bear Trap. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. December 03, 2020 https://payrollheaven.com/define/bear-trap/.
Chicago Manual of Style (CMS):
Bear Trap. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/bear-trap/ (accessed: December 03, 2020).
American Psychological Association (APA):
Bear Trap. PayrollHeaven.com. Retrieved December 03, 2020, from PayrollHeaven.com website: https://payrollheaven.com/define/bear-trap/

Definition Sources


Definitions for Bear Trap are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 4th February, 2020 | 1 Views.