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Glossary
Bear
Definition
A trader who believes that prices will fall. A bearish market is one in which prices are falling, whereas a bear market is when prices fall over a sustained period, often with a guideline of at least a 20% decrease.
What is a bear?
In financial markets, a “bear” is someone who believes that the market, a specific sector, or a particular stock is poised to decline. Correspondingly, a “bear market” is a period during which prices are falling or are expected to fall.
Why is the bearish perspective important to consider when trading?
The bearish perspective is essential in trading as it influences investment decisions and market sentiment. In a bear market, traders might look for opportunities to profit from declining prices using methods like short selling. Recognising the onset of a bear market can help traders avoid losses and capitalise on downward trends. However, it requires careful analysis and risk management, as misjudging market conditions can lead to significant losses.