What is a bear market?

Written by Evgenia Sidorova
Written by
Investing reporter
ECOS brand manager....
< 1   min.

A bear market is a market subjected to long-time drop of prices, representing the mark of drop exceeding 20% connected with total drop of mood among participants.

They are mainly linked with general increase of market. individual securities can also consist bear market if drop exceeds 20% during definite time—mainly more than two months. Bear markets also can consist recession and opposed to upward-accompanying bull markets.


Bear markets mainly divided into four different stages.
First stage includes stable prices along with optimistic forecasts among participants. Then investors are leaving markets.

The second stage consists of sudden fall of stock prices, trading activity, corporate profits and economic indicators, accompanied by panic among investors. This stage is called capitulation.

Third stage means emergence of speculators concerning market, provoking the increase of prices and trading volume.

Fourth stage consists of further slowed stock prices increase, usually followed by recovery.

Short selling

Additional profit for participants in a bear market is sometimes provided with the help of short selling. It means that lent shares are sold, then bought again at increased prices, leading to huge risk but it is justified event as it can be much better in comparison with all other activities.

Puts and inverse ETFs

Put allows selling a stock at peculiar price on definite date or earlier, moreover, they can be used for speculating on the increase of stock prices, and preventing it. Only privileged investors can manage such operations. When it comes to other markets, buying puts is safer than short selling.

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