Bearish Definition – What does it mean for traders? | Explanation

The stock market is bearish – This is what is meant by it! Definition

The stock market has its very own language, which is not always easy to understand, especially for beginners. In addition to technical terms from the world of finance, the securities market also likes to use figurative language. Surely you are already familiar with the term “bearish” – usually in connection with the direct opposite “bullish.

But what do experienced stock exchangewhen they speak of “bearish“? In this article, I will shed some light on the subject and explain to you what you need to watch out for as an investor.

Bearish is also called a pessimistic market situation.

Definition Bearish

With the winged word “bearish” is used to describe a mood on the stock market that is characterized by pessimism and falling prices prevailing pessimism and falling share prices. In the jargon of the stock exchange specialists, this situation is also often referred to as a bear market or a “bear market”. The negative expectations and the fear of price losses are mostly reflected in a sustained Downward trend downward trend. The emerging panic of investors further intensifies this dynamic, as they often sell their shares in a hurry. As a rule, the market becomes bearish, when the economy becomes sluggish. Often, these developments can also be seen in external factors: falling corporate profits, high unemployment and low income are just three of the warning signals.

There is no single definition of a bear market. However, losses of 20% in the overall market or in one sector can definitely be called such. For long-term “buy and hold” investors, a bear market offers some opportunities. It takes some courage, but often favorable acquisitions are possible here. Also through options trading can be made in a falling market Profits can be achieved.

The opposite of “bearish” is “bullish“. So if the stock market is doing particularly well, the “Bulls” are on the loose. In this “bull market”, the prices rise very strongly and the general Mood on the market is optimistic. The prospect of quick money attracts more investors into the market, so that the bull market can last for a very long time even without external influences. According to legend, this figurative language can be traced back to fights between a bear and a bull near the London Stock Exchange in the 17th century. While the bull attacked his opponent with a powerful thrust from the bottom up, the bear struck with his powerful paw from the top down. Thus, these two terms were coined to describe the price movements in the respective sentiment.

Examples of a bear market

After the financial crisis in 2008, the bulls ruled the stock market for twelve years. The various indices repeatedly climbed to new heights and “bearish” seemed to be a word from times past. However, the global Corona pandemic plunged the stock market into a bear market in March 2020. This did not last long, but brought sensitive losses for some investors. The so-called Internet bubble of 2000 also led directly to a bear market.

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