Definition of a bear

1 18 2017 - No comment
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What does it mean to be a bear?

Being a bear on the financial markets means selling shares that you don’t have and buying them back later at a lower price. This technique is also called short selling or shorting. This imagery is used because when bears attack the movement is from a high position moving downwards, an analogy of the movement in a bear market. The opposite of a bear is a bull which attacks with its horns, from a low position moving upwards.

Being a bear is risky and banks are often concerned about authorising their customers to take up this kind of position: these sales are mainly carried out through a broker. For brokers, bears are essential since they provide a counterparty.

How does a bear position itself on the market?

bear

To short sell, or to be a bear in financial jargon, you must first find a broker who allows short selling transactions. For a profitable short sell you then need to choose an asset with a bearish outlook. If the forecast is accurate, this is enough. For example, with a sale of shares, buy back the shares once the price has fallen and pocket the profit made from the difference in value. However, you should not forget that the broker will charge a rate of interest at the end of each day, for the shares used for short selling.

What does it mean to be a bear?

The expression bear is also used when a market is on the decline. We then say that it is a profitable market for bears, or simply that it is bearish.

 

Definition of a bear
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