What is on the stock market, what is a bear trap?

Creating a bear trap includes careful planning and setting of a set of circumstances in which there is a feeling of imminent short -term decrease in the price of a given security, followed by a long -term price rise. Basically, the bear trap is designed to encourage investors to buy at a higher price, with the expectation that during the rise the unit price will exceed the rate that was paid for stocks.

The bear market is an environment in which there is a large number of pessimism about the market performance of selected securities. The market is expected to drop, and this will lead to a situation where investors will be sold briefly to cover the expectations of the loss. Activity on this type of bear market means that opportunities to buy other shares can be quite good. However, the risk is that the market value will remain constant or will continue to decline. When this situation provides, the investor stands not to earn any money from the investment or maybe lose money.

For the same reason, the bear trap also has the potential for the investor to create large incomes. If the buyer accidentally acquires shares soon in the process, it is possible to pay prices that although higher than the current market value, it will still be significantly lower than the final price before the launch of the fall. This increases the chance of the stock price, which eventually increases to a level that justifies the purchase price and moves to the price of shares that results in great profit.

By further consideration of the bear trap is that the situation can lead to a phenomenon that is referred to as a bear grip. It is basically a bear press when the investor has to pay the price for stocks that will be difficult to create a profit on when the stock levels turn off and start to increase again. When it turns out that the investment will cause loss or even barely breaks, the situation is referred to as compression. The investor may feel forced to sell the acquired shares toeliminates any chance that other unfavorable conditions will create even more financial loss. Therefore, it should be included in the start of the bear trap with a clear understanding of the risk not only of the initial loss, but also other financial losses on the road.