What Does “Bearish” Mean?

The term “bearish” indicates a negative sentiment or outlook on an asset’s future price movement. If you’re bearish on a market, you’re expecting it to go down in value.

For example, if Jane is bearish on the euro, it means she believes the EUR will fall relative to other currencies.

A bearish sentiment can apply to individual assets, entire markets, or even economic conditions in general.

Characteristics of a Bearish Market

A bearish market is typically marked by:

• Lower highs and lower lows
• Declining trading volume
• Pessimism among investors and traders
• Increased volatility and fear

This type of market often triggers traders to adopt defensive or short-selling strategies.

Origin of the Term

The origin of the word “bearish” is tied to the bear’s downward swipe, symbolizing falling prices. While the exact history is unclear, some believe it is connected to the 19th-century painting “The Bulls and Bears in the Market” by William Holbrook Beard, which depicted the chaos of financial markets during the U.S. stock market crash of 1873.

Bearish Traders and Strategy

Bearish traders aim to profit from declining prices by:

• Short selling
• Buying put options
• Trading inverse ETFs or derivatives

They often use technical analysis to identify trends and resistance levels, looking for breakdowns or signs of weakness in price action.

Bullish vs. Bearish

Conclusion

Being bearish means expecting a decline in prices. It reflects a trader’s negative sentiment and affects the strategies they employ. Whether applied to individual assets or broader markets, understanding bearish behavior helps traders navigate downtrends and mitigate losses.

In contrast to bullish traders, bearish participants prepare for the worst, seeking profit opportunities even when markets are falling.