Dealing with a Bearish Market

A bear market is something many financial traders and economists would like to avoid if given the choice. This is because when conditions become bearish, values start sinking significantly for an extended period of time, threatening to completely wipe out investments. Traders who find themselves holding a security that has suddenly and sharply dropped are often left in a big hole that is hard to escape from.

Thankfully, the above scenario is lessened to a large degree in the Forex. Since what is being traded here are pairs instead of single shares, bonds, or commodities, there will commonly be a bull market to accompany the coming of bears.

This means that if one side of a pair is undergoing a bear market, simply buy its counterpart to take advantage of the trend. You can even short the currency entering the bear market since you don’t have to look for another trader willing to take the pairs for you. The Forex is an extremely liquid market where trades can be executed at almost any point in time, enabling you to profit from any movement in a currency’s value.

Another strategy is to carefully study the factors that contributed to the bear market so you can predict when it will end and return to normal levels. This way, you can hold on to a pair or even buy it an extremely low price to magnify your potential profits.