First things first, why do we call them
Bull and Bear markets? While there are different interpretations of where the
names come from, the most common one relates to the way the said animals act.
Specifically, both “bear” and “bull” derive from the way
the animals attack their opponents. In other words, a bull will thrust its
horns up into the air, while a bear will swipe down.
This metaphor was then applied to the
movement of the markets. Uptrends were regarded as bull markets and downtrends
were seen as bear markets.
Global economic events have the
power to affect the markets and the first quarters of 2022 have kept traders
and investors on the edge of their seats. Keep reading to find out what you can
do when the markets are bearish!
Understanding
Bear Markets
When the market falls by at least 20%
over a period of two months, it is considered a bear market. It is important to
remember that bear markets can result from recessions in which unemployment is
high and GDP is negative.
What
can you do?
·Avoid impulsive
reactions
Bearish market sentiment can appear
troubling and challenging. With falling prices, you may start to fear the
future of your investments. However, it is in such moments that you need to
maintain your calmness and discipline so as to not resort to on-the-spot
decisions that could be damaging to your trading positions. Your next move
should be based on a variety of factors and not just a sudden change in the
markets.
·Think about your
goals
An effective way to stay disciplined
throughout the day is to always bring to mind your ultimate trading plan. This
plan includes your trading strategies, your exit options, your goals, and your
risk management strategies. By remembering these aspects, you will feel more
confident in taking or not taking the next opportunity to trade, because your
trading plan will guide you throughout your decisions.
·Identify strategic
opportunities
As a trader, you probably already know
that online trading comes hand in hand with both profits and losses. Therefore,
it is your responsibility to be on top of your trades and one step ahead of
economic events. By boosting your trading skills and knowledge, you will be
able to more easily identify opportunities to enter or exit the markets.
The
most Significant Bear Markets of the last 15 years
●
October 2007—November 2008
With a market drop of nearly 52%, a
bear market lasted for 408 days. This is the period when the housing market
collapsed and is known as the Great Recession, which lasted through Q3 of 2009
when an economic boost package was approved.
●
February
2020—March 2020
This was a short bear market as it
lasted only 33 days, but had a huge impactful market drop of nearly 34%. The
global pandemic had impacted every socioeconomic aspect and the markets
witnessed the consequences. Unemployment also exceeded 14.5% due to
restrictions, safety measures, and budget cuts.
What’s
important to keep in mind when roaming the markets is that everything could change at any time. The highly volatile
nature of the markets requires patience and perseverance. For this reason, it
is vital for traders to keep boosting their knowledge and skills, and our team
at XPro Markets has made
sure to provide you with educational resources to help you face every “bear” and “bull” that may arise.
Risk Warning: Contracts for Difference
(‘CFDs’) are complex financial products, with speculative character, the
trading of which involves significant risks of loss of capital.
Disclaimer: This material is considered a
marketing communication and does not contain and should not be construed as
containing investing advice or a recommendation, or an offer of or solicitation
for any transactions in financial instruments or a guarantee or a prediction of
future performance. Past performance is not a guarantee of or prediction of
future performance.