What it looks like
Find the lowest low of the last 20 candles. A candle closes below it, which looks like a real breakdown. Within the next three candles price closes back above that old low. The lowest point reached during the failed break is the extreme that matters for the stop.
What it means
A 20 candle low is a level many traders watch. Sellers sell the break and buyers' stops are triggered below it. When price cannot stay down and returns above the level within three candles, those new sellers are trapped with stops above, and buying them out pushes price higher. It shows there was not enough selling to hold the lower prices.
How to trade it
- 1
Mark the low of the last 20 candles and watch for a close below it.
- 2
Confirmation: within three candles, price closes back above that low.
- 3
Entry: buy once price is back above the level.
- 4
Stop: below the lowest point of the failed break. Example on gold: 20 candle low at 4,010, a close at 4,004, low of the move 4,000, then a close at 4,013. Buy at 4,013, stop at 3,998, a 15 point risk.
- 5
Target: the middle or top of the recent range, or 2 times the stop (30 points, near 4,043).
A close below the low of the failed break.
Where it works best
In ranges and at well known lows such as the previous day low, where a break pulls in many sellers who then get caught.
WickSpeak spots bear traps automatically and names them on the candles that made them. The note says what the failed breakdown is, how to trade it and the close below its low that would prove it wrong. In Playbook you can use it as a condition in a play, alone or alongside other patterns and indicators (any of the 146 patterns can be a condition), and backtest it on past candles with your own costs.
Common mistakes
- Buying while price is still below the level, before it has closed back above.
- Calling a breakdown a trap after more than three candles, when it has really held.
- Fighting a strong downtrend, where breakdowns usually follow through.
Related patterns
Questions traders ask
What is a bear trap in trading?
It is a breakdown that fails. Price closes below a watched low, pulls sellers in, then climbs back above the level within a few candles and leaves them on the wrong side.
How do you know it is a bear trap and not a real breakdown?
You only know after the fact: a close back above the broken low within three candles. Until then, treat the breakdown as real.
Is a bear trap the same as a liquidity sweep?
They are close cousins. A sweep usually pokes below a low with a wick and closes back above on the same candle; a bear trap closes below first and recovers within three candles.
Where should the stop go?
Below the lowest point of the failed breakdown. If price closes below there, sellers have taken control after all.