What are Bear Markets?
They are any financial market, in which prices of a security or a group of securities keeps falling. There is a wave of gloom and doom. Traders are pessimistic about the market. All those holding the stock are interested in selling stock. Every one seems to be disinterested about that market.
It is probably so named, because the bears fights by beating down with their paws.
In this market the charts clearly indicate the investor pessimism and lack of confidence, in the performance of the securities. The prices keep making lower lows and lower highs. Since the price keep moving down, It is also termed as Down Trend.
Trend is your friend. Dance with the friend. Tune to the trend.
The hall mark of a bear market is lower low swing bottoms and lower high swing tops.
There is widespread pessimism and gloom in the market. This may be triggered by a news or an event. So traders keep selling as the price makes new lows. Once the price has reached a low, some traders wants to buy because the stock is available cheap. So the price goes up with increased demand. This causes prices to swing up, which is seen on the stock charts as swing bottoms.
When the price up a little, those who could not sell at high price, wants to use the opportunity to sell. Also those who bought at a lower price wants to book profit. The supply increases pushing the price low. This swing down of prices is seen on the stock charts as swing tops.
In a down trend, the price does not go above the previous swing tops when they rally up. When they fall they fall below the previous swing bottoms. So these swing bottoms are lower than the previous swing bottoms and the swing tops are also lower than the previous swing tops.
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In a market which is bearish the charts clearly indicate the investor pessimism and lack of confidence, in the performance of the securities. A down trend predominates in this market. The prices keep making lower lows and lower highs.
This market is very ideal for trend trading by shorting the market. Never go long in a bearish market. Even if your time of entry is wrong, a short trade is always profitable.
A down trend is more stronger if the down days (days where close price is lower than open price) are accompanied by increased volume and up days (days where close price is higher than open price) are accompanied by decreased or normal volume.
The onset of a bearish market, as determined by the stock charts, is sometimes dramatic. A fall in the market precedes a doom and gloom of general economy. The momentum of fall is faster than the momentum of rise of a bull market.
There is a saying that, the market goes up by stairs, but comes down by lift.
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