This term may refer either to the market or traders' behavior. It originates from a real bear who attacks downwards with its paws, which is a metaphor for pushing prices down.
Bears are traders who are pessimistic about the asset price and believe in its downward direction. Keeping in mind that the market will soon drop, they plan on profiting from short selling. That is to say, bears sell borrowed assets and repurchase them at lower prices. It is an advanced strategy that involves a very high risk of loss. Use it wisely, and only when you are experienced enough.
The market is considered to be bearish when the stocks, commodities, and indexes decline by 20% or more. This trend usually pairs with the overall economic stagnation, unemployment, a drop in business profits, and unstable social and political situation in the world.
Beware of a near trap that is created by investors of stocks and commodities sell the assets to make you think that the bearish market is overtaking the trend. Once in a bull trap, traders sell in fear of an inevitable drop. However, most of the time, the market either climbs or stays at the same level.
Use Bulls/Bears Power oscillators and Exponential Moving Average indicator (EMA) to identify the best entry/exit points for a bearish market.
2020-12-03 • Updated