Long vs Short, Breakout vs Fakeout, Bear Trap vs Bull Trap, Black Swan – Explained

This is part of my Crypto Jargon series where I’m breaking down the most used crypto terms, acronyms and trading slang.
Today’s terms are all related to trading and you’ll often see them in market analysis and on social media, especially in regards to cryptocurrency price predictions on twitter and forums or trading signals.

Let’s look at Long, as in “I am long on bitcoin” or “I’m going long”
It can also be used as a verb: “I am longing bitcoin” – meaning taking a “buy” position in margin trading.
Those who are “Long” on an asset are also being “Bullish” – in other words, they are optimistic about prices going up.

These are usually the buyers on the market. So, Bullish means “expecting rising prices”, while “going Long” is taking a position as in buying or betting on a price going upwards.

The opposite to that is being Short, “Shorting” or “going Short”.
That is to take a short position, as in “selling”.
Those who are shorting are known as being “Bearish” – as in “expecting prices to fall”.

The terms Bullish and Bearish are in connection to Bear and Bull – trading slang borrowed from the traditional markets and not exclusive to crypto. Bears are those traders who are in favour of falling prices in comparison to the downward movement that a bear makes when it attacks. Respectively, Bulls are the traders who are in favour of rising prices in comparison to the upward move that a bull makes when it attacks. The market is a continuous fight between bulls and bears. When the trend is down, we say that the bears are taking hold of the market. When the trend turns upward, we say that the bulls have taken control.

Breakout and Fakeout.

In simple terms, a Breakout is the event when a coin’s price moves outside a defined support or resistance level with increased volume. Many traders wait for the price of a coin to break above resistance level to enter a long position since this acts as a signal that the direction of the asset is now going to be up. Or they would enter a short position after the asset (or coin) breaks below support. The breakout acts as an indicator of a trend direction, which is why some traders only take positions only after a breakout occurs.

Fakout as you correctly guessed, is a fake breakout. In other words, the breakout occurs but fails to drive the prices in its direction and is short-lived, after which the prices continue in the direction they were prior to the breakout.

This is also connected to the next two terms: “Bull Trap” and “Bear Trap“.

A “Bull Trap” occurs when a trader or investor buys a ‘fakeout’ – i.e. they buy a coin that breaks out above a resistance level but the move turns out to be a false signal and fails to drive the prices up and “traps” the buyers who acted upon it, resulting in losses on their long positions.

A “Bull Trap” is usually triggered by speculators who buy huge amounts of a coin, in order to artificially drive prices upwards, thus creating a false bull-market.

Those who are fooled by the bull trap will often buy at the inflated price, in the belief that the upward trend will continue and the coin will rise even more in value but instead, it quickly falls back to previous lows.

The opposite to that is a “Bear Trap” and is used when the price of an asset is in a downward move and then rises sharply back up “trapping” the bearish speculators who were shorting their positions. It is usually a manipulation of the market. Once the bear trap is released, the value will even-out, or even climb.

And since we are talking about unexpected market moves, this is where the Black Swan comes into the picture.

A black swan is an event or occurrence, that deviates beyond what is normally expected of a situation and has a major impact. Black swan events are typically random and unpredictable and traders cannot forecast them through a typical Technical or Fundamental Analysis.

The jump in Bitcoin value back in April from the $4000 range up to $5000 for the first time in a long while, which also marked the end of the bear market, was considered a Black Swan event due to the lack of fundamentals to push the price, there was no major event or news that day or even that week, it was kinda out of the blue and many shorts were capitulated during this pump, which was followed by an increasingly bullish sentiment and the prices continued rising after.

The terms pump, capitulation, Technical and Fundamental Analysis are also explained throughout these series so make sure you catch these episodes (see description below).

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