Forex Dictionary Terms

Bear Market

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Definition – What does Bear Market mean?

A bear market is a slang term for a financial downturn in a specific market segment, economy, security type, currency and so on. In a bear market, the attitude of market participants tends to be negative, which adds to the downward pressure on the prices within the market and encourages more selling. There are no set rules to declaring a bear market, but the general agreement is that the decline in values must persist over several months.

ForexTerms explains Bear Market

A bear market is easily recognized in most markets by watching broad market indexes like the S&P; 500. When the S&P; has continuous month over month declines, the chances are good that the U.S. stock market has entered a bear market.

In forex, the formation of a bear market is a little trickier. Because currency is traded in pairs, a steady decline in one currency of a pair can owe to a decline in the health of the underlying economy or an increase in the strength of the economy of the other currency. A true bear market in a particular currency occurs only when that currency sees its value drop broadly against a majority of its trading pairs. The price action within a single currency pair is not enough on its own.

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