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Forex bear trading

Many a times we have come across the term forex bear in our day to day living. It a quite commonly used term in the stock markets, other trading avenues and even in the forex parlance. Speaking of the bear or a bearish run is sure to bring out a frown and sometimes even panic attacks in the most seasoned of traders.

Origin of the term

Though no one is exactly sure who coined this term and when, one thing everybody agrees upon is that it is not a good sign. A bear attacks its prey by bringing its claws down. Similarly, when we say that the forex market is having a bearish run; it signifies that it is depreciating all the currency values, bringing in a loss for all and sundry.

Triggering factors

There are many factors which trigger a bear run. A far reaching decision by one of the governments, volatile share market trading, investor unrest but mostly it's due to investor speculation. In some cases, it may even be triggered by certain banks with vested interests for which it would benefit if the forex comes down.

Implications

Forex market having a bearish run is a sure sign of worry for all the involved traders and brokers. A bearish run in the forex market, leads to the large scale depreciation of the currency values. This is a very ominous sign for those holding a large leverage, because the larger the leverage you hold, the more loss you will make.

Usually when the forex is having a bearish run there is a massive selling which is seen. This is also known as panic selling. Without thinking and just watching what others are doing, people begin to sell thus sometimes prolonging the bearish run.

Things to do during a bear run

There are a certain fundamentals that need to be followed during a bear run to minimize your losses:

Firstly and most importantly, DON'T PANIC. Various illogical decisions are made when our faculties get numbed by the bear run. Keep your cool; there is money to be made even during a bear run.

Keep your leverage at an optimal level. Most traders believe that a leverage of 1:50 is the maximum for successful forex trading. Remember, more your leverage, more your losses in a bear run.

Keep a stop call on all your exchanges. This ensures that during a period of volatile trading; your losses will be minimized as you can sell much before the forex crashes further.

Buy when the market is at its lowest. It may sound absurd to say it, but it's one of the most prudent decisions you are ever going to make. This is for the simple reason that the forex is not always going to be down. Trade and foreign exchange rates will surely pick up sometimes right in middle of a bear run and thus, you can leverage your way to profit.

So the next time the forex has a bearish run its time to buckle up and make some money.