Bearish is a term used to describe how a trader feels about the direction of a certain financial market or the actual direction a market may already be moving in.
If a trader has a bearish bias towards a specific market or financial instrument, they believe that the future direction of the price will be moving downwards. A market can also be described as being bearish in that it is displaying characteristics that would imply that its future move is down or if already moving downwards that this trend is likely to continue for some time.
Being bearish or being in a bearish or bear market is the opposite to being bullish or in a bull market which is when a market is showing upward trend characteristics or a trader holds a bias that the future direction of the market is up.
Identifying bearish market trends is crucial to the success of a trader because market sentiment is a leading factor in determining the direction in which a financial market will move. Being able to identify when this is taking place or coming to an end is a key factor in maximizing trading profits or limiting losses.
Key takeaways:
- A trader with a bearish bias believes that the future price of a market will be down.
- Bearish is the opposite of bullish where the trader’s bias is that the market will be moving upwards.
- Identifying bearish and bullish market trends is crucial to a trader’s success.