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 bearish, seek to get more profit from previously concluded orders to sell a currency, because the lower the rate at which a deal can be closed, the more profit the trader will receive.

Bear Market Trading Strategy

If you determine that a bearish trend is prevailing in the market, this is in order to open a sell transaction, which will be closed after the price drops even lower.

For example, you first sell the EURUSD pair in the amount of 110000 at a price of 1.10000 dollars per euro, and then close the transaction at a price of 1.08000 or in the amount of 108000 dollars. As a result, your profit will be 2000 US dollars.

The strategy for working in a bear market is quite obvious, but still has some of its own characteristics, because it should be taken into account that the existing trend cannot last forever and will soon be replaced by an upward trend.

For this reason, when opening sell transactions in a Bearish market, you should determine how long this trend prevails and only after that place a new order .

At the same time, you should not focus only on knowledge of the prevailing trend; it would not be amiss to conduct technical analysis and evaluate the fundamental factors currently influencing the trend.

As a rule, artificially created trends do not last long, since large resources are required in order to stimulate an existing trend.

And if it is not supported by fundamental factors, the rate will return to its previous direction. A reversal usually occurs after the market has entered an oversold zone and the existing price no longer suits sellers. But a change in trend can also be caused by strong positive news on the base currency in the currency pair ; in this case, the bears will no longer be able to hold the market and will begin to close existing transactions.

It is the moment of reversal that is the best time to open buy transactions, since in this case there is a fairly high probability of successful transactions.