Bear market

Very often when trading on Forex or the stock exchange, you come across the concept of “Bear Market” or hear the statement - today the Bears dominated the market.

The question arises - what kind of market is this and what kind of animals live in it?

A bear market is a situation when the majority of traders are working to lower the rate, usually actions are carried out only on one or several trading instruments.

The initiators of this trend are “Bears” - traders who are interested in reducing the price of a certain currency pair or other financial asset.

When the number of such trading participants begins to play a decisive role, the market becomes “Bearish”.

As a rule, at such a moment a stable downward trend is formed on the exchange, the number of sales transactions is steadily growing, which further contributes to the decline in the price of the asset.

Bears, when playing for a fall, seek to obtain more profit from previously entered orders to sell a currency, because the lower the rate at which the transaction can be closed, the more profit the trader will receive.

Bear Market Trading Strategy

If you have determined that the market is in a bearish trend, this is to open a sell trade, which will be closed after the price drops even lower.

For example, you first sell the EURUSD pair for 110,000 at a price of 1.10000 dollars per euro, and then close the trade at 1.08000, or for 108,000 dollars. Your resulting profit will be 2,000 US dollars.

The strategy for trading in a bear market is fairly straightforward, but it still has some unique features. It's important to remember that the current trend can't last forever and will soon be replaced by an uptrend.

Therefore, when opening sell trades in a bear market, it's important to determine how long the trend will persist before placing a new order .

At the same time, one should not rely solely on knowledge of the prevailing trend; it would not be a bad idea to conduct a technical analysis and evaluate the fundamental factors currently influencing the trend.

Artificially created trends typically don't last long, as they require significant resources to stimulate an existing trend. And if it's not supported by fundamental factors, the price will revert to its previous direction.

A reversal usually occurs after the market enters oversold territory and the current price no longer satisfies sellers. However, a trend reversal can also be triggered by strong positive news for the base currency in the currency pair ; in this case, bears will no longer be able to hold the market and will begin to close existing trades.

The moment of reversal is the best time to open buy trades, as in this case there is a fairly high probability of successful trades.