Bearish

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Definitions of Long, Short, Bullish, and Bearish

Meaning of Common Trading Terms

Trading has a language of its own. If you’re just starting trading, long, short, bullish and bearish are trading terms you’ll hear frequently—and you’ll need to understand them. These words are important for effectively describing market opinions and communicating with other traders. Understanding these terms makes it easier to gauge where a trader thinks the market is heading, and whether they’ll make money on an asset’s rise or its fall.

Traders can think of “long” as another word for “buy.” If you’re “going long” in a stock, it means you’re buying it. If you’re already long, then you bought the stock and now own it.

In trading, you buy (or go long on) something if you believe its value will increase. This way, you can sell it for a higher value than you paid for it and reap a profit.

As an example, assume Suzy goes long 100 shares of ZYZY stock at $10.00, costing her $1,000. Several hours later, she sells the stock for $10.40 per share, collecting $1,040 and making a $40 profit. If the price moves down to $9.50, her long position isn’t profitable. If she sells at that point, she’ll lose $50 ($0.50 loss x 100 shares).

Bull or Bullish

Being long or buying is a bullish action for a trader to take. Put simply, being a bull or having a bullish attitude stems from a belief that an asset will rise in value. To say “he’s bullish on gold,” for example, means that he believes the price of gold will rise.

Being a bull can represent an opinion or action. Someone who’s bullish may go long on the assets they’re bullish in. Or, they may just have an opinion that the price will rise, but decided against making any trades based on that opinion. Bullish stances can be extremely specific opinions about a single stock, or they can be broad opinions about the overall market.

The term “bull” or “bullish” comes from the bull, who strikes upwards with its horns, thus pushing prices higher.

A bull market is when an asset’s price is rising—called an uptrend—typically over a sustained period, such as months or years.

Bullish, bull, and long are used interchangeably. For example, instead of saying “I am long on that stock,” a trader may say “I am bullish on that stock.” Both statements indicate this person believes prices will rise.

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Short and Shorting

Most people think of trading as buying at a lower price and selling at a higher price, but that’s only part of what traders do. Traders can also sell at a high price and buy back at a lower price. Being short, or shorting, is when you sell first in the hopes of being able to buy the asset back at a lower price later.

In other words, the financial markets allow traders to buy then sell, or sell then buy. If you’ve done the latter, then you’re short the asset. You’ll also hear the term short-selling. This is the same as shorting.

In the futures and forex market, you can short anytime you wish. In the stock market, there are more restrictions on which stocks can be shorted and when. No matter the market, if you hear someone say they are shorting something, it means they believe the price will go down.

Assume Suzy shorts 100 shares of ZYZYZ stock at $10.00. Since she sold first, she’ll receive $1,000 into her trading account, but her account will show negative 100 shares. The negative share balance must be brought back to zero at some point by buying back the 100 shares.

An hour later, she buys 100 shares back for $9.60 per share at a total cost of $960. Since she initially received $1,000, buying the shares back for only $960 gives her a $40 profit. However, if the price moves up to $10.50, she is losing $50 ($0.50 extra cost x 100 shares).

bearish

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Definition of bearish

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Other Words from bearish

Synonyms & Antonyms for bearish

Examples of bearish in a Sentence

These example sentences are selected automatically from various online news sources to reflect current usage of the word ‘bearish.’ Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

Bearish

A bear is an investor who believes that a particular security, or the broader market is headed downward and may attempt to profit from a decline in stock prices. Bears are typically pessimistic about the state of a given market or underlying economy. For example, if an investor were bearish on the Standard & Poor’s (S&P) 500, that investor would expect prices to fall and attempt to profit from a decline in the broad market index.

A bear may be contrasted with a bull.

Key Takeaways

  • A bear is an investor who is pessimistic about the markets and expects prices to decline in the near- to medium term.
  • A bearish investor may take short positions in the market to profit off of declining prices.
  • Often, bears are contrarian investors, and over the long-run bullish investors tend to prevail.

Market Mentalities: Bulls Vs. Bears

Understanding Bears

Bearish sentiment can be applied to all types of markets including commodity markets, stock markets, and the bond market. The stock market is in a constant state of flux as the bears and their optimistic counterparts, bulls, attempt to take control. Over the past 100 years or so, the U.S. stock market has increased, on average, by 10% per year. This means that every single long-term market bear has lost money. That said, most investors are bearish on some markets or assets and bullish on others. It is rare for someone to be a bear in all situations and all markets.

A bear market technically occurs when market prices 20% or more from recent highs.

Bear Behaviors

Because they are pessimistic concerning the direction of the market, bears use various techniques that, unlike traditional investing strategies, profit when the market falls and lose money when it rises. The most common of these techniques is known as short selling. This strategy represents the inverse of the traditional buy-low-sell-high mentality of investing. Short sellers buy low and sell high, but in reverse order, selling first and buying later once — they hope — the price has declined.

Short selling is possible by borrowing shares from a broker to sell. After receiving the proceeds from the sale, the short seller still owes the broker the number of shares he borrowed. His objective, then, is to replenish them at a later date and for a lower price, enabling him to pocket the difference as profit. Compared to traditional investing, short selling is fraught with greater risk. In a traditional investment, because the price of a security can only fall to zero, the investor can only lose the amount he invested. With short selling, the price can theoretically rise to infinity. Therefore, no limit exists on the amount a short seller stands to lose.

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