In trading, a bear market is a market where share prices consistently decline, and there is an overall pessimistic sentiment among traders and investors. A bear market is associated with increased volatility, a flight to safe haven assets, and declining equity markets, and it is an example of a sustained risk-off environment. The reverse of a bear market is a bull market.
Bear markets last for varying lengths of time. This can range from several months to several years, depending on the underlying economic indicators. These indicators include unemployment numbers, corporate earnings, and consumer confidence.
During a bear market, traders and investors can still find opportunities to mitigate losses and potentially profit from downward price movements. Some strategies traders can use include short-selling, defensive investing, and hedging.
Short selling: Traders sell stocks or other assets they do not own in hopes of buying them back at a lower price in the future. They often borrow these assets from brokers and securities lenders and return them after short selling.
Defensive investing: Traders use defensive assets, such as bonds, gold, and defensive stocks, to protect against market volatility during a bear market. The chosen assets are generally less volatile, providing a source of stability to limit losses and generate profit from downtrends in the market.
Hedging: Traders use hedging strategies to protect against downside risk during a bear market. For example, they can invest in options contracts to protect against potential losses on existing long positions or take a short position on an asset that is negatively correlated to their portfolio.
ADSS offers a range of global markets for traders, with CFD opportunities in indices, commodities, forex, equities and more. We also feature tutorials, how-to guides, and weekly webinars to help you navigate the financial markets and find better trading opportunities. You can start trading and investing online by opening a live trading or demo trading account.