Bear Market
Market ConditionsQuick Definition
A market condition where prices fall 20% or more from recent highs.
Detailed Explanation
A bear market occurs when a broad market index falls by 20% or more from its most recent high. Bear markets are characterized by widespread pessimism, negative investor sentiment, and declining economic prospects. They can last from a few months to several years. During bear markets, investors often shift to defensive strategies, short selling increases, and safe-haven assets become more attractive. Understanding bear market dynamics helps traders protect capital and identify potential bottom formations.
Real Trading Example
The 2008 financial crisis led to a bear market where the S&P 500 declined by approximately 57% from its October 2007 peak to its March 2009 trough.