When is a bearish signal not 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).

Japanese Candlesticks Series – 7 Bearish Continuation Signals

Japanese candlesticks are by far the best method for viewing financial charts. They help bring the data to life in way that is easy to read and provide signals for traders that produce results. Of course, not all signals are the same. There are bull signals and bear signals, continuation and reversal signals as well as long term and short term signals. This article is one in a series we’ve produced to help traders learn and identify only the best signals in order to make the most of this powerful trading tool. In previous articles we’ve explained what candlesticks are, Japenese Candlesticks – Trading Naked, and some of the basic one and two candle formation, Japanese Candlesticks – The Sequel. In this article I will go into more depth with multi-candle signals, specifically Bearish Continuation Signals, other articles in this series will cover reversal signals, doji signals and of course Bullish Continuation Signals.

Definition of Continuation Signal – A continuation signal is one that points to ongoing strength in a trend. A trend, in this case a bearish trend, is when prices move lower in a systematic way over time. A bearish continuation signal is one that indicates that the bearish trend is healthy, intact and that prices are heading lower. They can be as simple as one candle, but the most powerful such as the ones in this review often require 3 or 4 candles for confirmation.

Types of Bearish Continuation Candlesticks

1. Three Black Crows

The Three Black Crows is one of the most easily recognizable of all bearish continuation patterns. It is in fact the bearish version of the Three White Soldiers, the bullish continuation patter, and created in a near identical fashion. The difference is that the “three soldiers” or crows are long black candles, longer than average, that appear one after the other. These can form at the top of a trend, just after the reversal, or during a trend and have the same meaning in either case; bearish sentiment is strong and lower prices are on the way. Additional signs of strength occur when this pattern confirms a resistance level, breaks through a potential support or comes with high volume.

2. Falling Three Methods

This is bearish pattern is also a mirror image of a bullish continuation pattern, the rising three methods. Despite the name it is in fact a 5 candle pattern, not 3, and formed when a strong black candle is followed by three small candles, white or black, that slowly rise within the body of the first. The 5 th and confirming candle is another long black candle that opens below the open of the first, and closes below the low of the first. The pattern is in fact two signals; the first four candles are a consolidation which could result in a reversal or a continuation, the second and final signal is the last candle which confirms that the bears are in control. It can form in the middle of a range, or at any point during a down trend, but gives off the strongest signals when it confirms resistance and/or a break of support.

3. Downside Tatsuki Gap

This, like most patterns, has both a bullish and bearish version. In the bearish version a long black candle will form, signaling there is some strength in the move. A second black candle will follow, opening a gap from the first, confirming the strength of bearish sentiment. The confirming candle is in fact a rebound from the low of the second candle that will move up and try, I repeat TRY, to close the gap opened between the first and second candles. The confirmation comes with the close of the third candle; if the gap is not fully closed, or if it is only closed with upper shadow but not with the closing price of the third candle, you can be assured that the bears are still in control and that lower prices are coming within the next candle or two.

4. Bearish Separating Lines

The bearish separating lines are a pattern that require only 2 candles but nonetheless is very powerful. The signal occurs during an identified down trend and comes after a one candle retracement. The first candle will be a long white candle which forms during the downtrend, probably moving up from a support target or perhaps sparked by a news event. The second candle will be bearish, the longer and stronger the better, that opens below the open of the first candle and moves lower from there. This pattern can form at any point during a confirmed down trend but performs best when the down trend is nearing a potential bottom, not just potential support, as it is often caused when the bulls begin to give up hope of reversal.

5. Bearish On-Neck Lines

The bearish on-neck lines is another great, reliable, continuation pattern. At first glance you may think it is the same as separating lines but no, take a closer look. The first candle will be a long black candle within a down trend. This signifies strength in the move if not outright continuation. The second candle will be a long white candle that opens with a gap and then moves up to close the gap but closes equal to or below the close of the first candle. The analysis is that prices gap down to a potential support, but support is not strong enough to overcome the bears, and leaves price vulnerable to further downside.

6. Bearish Side By Side White Lines

This is a continuation pattern you find listed in most books but what most of the books won’t tell you is that it is extremely rare. This is a three candle pattern that occurs in a down trend and is formed when prices gap lower at the open and then form two white lines with nearly identical opening and closing prices but do not close the gap. It is similar to the Bearish On-Neck Line but as mentioned, requires two white candles to form not just one. It is a sign that bulls are losing their grip on the market, are being overpowered by bears and will soon capitulate. As a continuation it is pretty accurate but in most cases come very near the bottom of a down trend and will usually lead to a reversal in the near to short term (depending on the time frame you are trading).

Meaning of bearish in English

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bearish adjective ( ANIMAL )

bearish adjective ( FINANCE )

You can also find related words, phrases, and synonyms in the topics:

bearish | Business English

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Word of the Day

to show that something is true by your actions rather than your words

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