Bear trader

DEFINITION of Bear trader

The bear trader is a trader who wants to short sell financial instruments.

The term “bear” is used because when a bear attacks, it swipes downward onto its victim.

WHAT IT IS IN ESSENCE

A trader who wants to profit from expecting a falling or bear market trend will do so by short selling financial instruments such as commodities, stock market shares or currencies. The opposite, expecting prices to rise is called bullish. Bears believe that a market, asset or financial instrument is going to head in a downward course. But bulls believe that a market is going to head upwards.

Bearish traders believe that a market will soon drop in value, and will attempt to profit from its drop. Bears believe that markets are set to drop in price. So, the traditional investment saying – ‘buy low sell high’ doesn’t apply. Instead,  bears attempt to short sell.

Short selling is a way of trading an asset that returns a profit if it drops in price. If you were short selling stock, for example, you would borrow some stock from your broker, and immediately sell it at the current market price.

HOW TO USE

Once the stock has dropped in price, you would then buy it and return it to your broker, keeping the difference in price as profit. This puts them in disputation with bulls. The ones who will buy a market in the belief that doing so will return a profit. When the number of bears trading a market is larger than the number of bulls, the market will usually drop in price. Because of this, a market that is experiencing a sustained drop in price will be referred to as a  bear market. Whereas one that is increasing in price is a bull market.