Bearish market refers to a situation when the prices of an asset are moving down. A bearish market reflects negative sentiment and often occurs when economic data is below expectations. When a bearish market occurs, traders tend to sell assets and buy so-called safe-haven financial instruments like JPY, gold, CHF, and others.

A bearish market is often driven by fears, and they are characterized by increased volatility. When it comes to trading, market participants tend to sell at the highest possible point and buy at the lowest possible price. When it comes to digital option trading, to capitalize on such price movement, you need to buy a Lower contract.

Identifying Bearish Markets

To spot bearish markets, market participants can use a variety of tools. They include:

• Trendlines. This line connects the lower highs of the price, telling traders that the downtrend is prevailing.
• Moving averages and their combinations allow market participants to clearly see the market direction.
• MACD or the Bollinger Bands indicator.