November 29, 2022

Bear Market in Forex Trading

LQDFX Forex news blog: Bear Market in Forex Trading

Share this article

Bear is an investor who believes that prices/ the market will decline. Bear Market is a market characterized by a prolonged period of declining prices and widespread pessimism.

However, prices don’t have to fall the entire time. Actually, prices may correct (or retrace) from time to time, creating a series of lower highs and lower lows. Since the prices go lower and create lower lows not higher than the previous lower high during retracements, then the market is bearish.

In a bear market traders expect losses as pessimism grows and selling increases.

The term “bear market” is the opposite of a “bull market”.

Bear Market and volume of trades

A lot of indicators can help a trader identify a bear market, although it is not always so easy or so clear. One indicator is the volume for assessing the movement of the prices and, thus, if there is a bearish trend. Reversals are usually accompanied by a high volume of trading, whereas retracements often occur on low volume trading.

Where did the bear market get its name?

There are various possible scenarios.

According to etymologists, one of such scenarios point to a proverb warning that it is not wise “to sell the bear’s skin before one has caught the bear.” By the eighteenth century, people used the term bearskin in the phrase “to sell (or buy) the bearskin” and in the name “bearskin jobber,” referring to one selling the “bearskin”. Bearskin was quickly shortened to bear, which was applied to stock that was being sold by a speculator and the speculator selling stock.

The most popular scenario about the origin of bear market is the observance of the animal’s method of attack. A bear attacks its prey — swiping its paws downward. Therefore, bear markets are the markets with falling stock prices.

START TRADING

Sources: Investopedia, Merriam-webster

PLEASE NOTE The information above is not investment advice.