Stock Exchange

Bear Market

The term bear market is used to denote a market environment in which more traders are selling an asset than buying it. In a bear market, the value of the corresponding asset decreases. Because supply outweighs demand, sellers must lower their prices in order to compete for buyers.

In a broader sense, the term bear market is used to denote a widescale decline in demand across an entire capital market rather than the market for just one asset.

Investors can achieve returns in a bear market by opening short positions. A short position lets you earn a capital gain when the price of an asset sinks.

Investors who open long positions ahead of or during a bear market lose because the value of their assets in relation to the price which they bought them for declines. If investors sell an asset for a lower price than they paid for it, they make a capital loss.

See also: Bull market

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Editor Daniel Dreier
Daniel Dreier is editor and personal finance expert at
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