DEFINITION of 'Bear Closing'

Purchasing a security, currency, or commodity in order to close a bear position. Bear closing is a strategy designed to profit from falling prices and may be used when an investor sells assets that it does not possess, known as a bear position.

BREAKING DOWN 'Bear Closing'

Investors who hold a bear position hope that the price of a security, currency, or commodity will fall, allowing the investor to cover or close a position that was opened when the investor sold a security, currency, or commodity that was not in the investor’s possession. The difference between the price that the investor sold the security, currency, or commodity at and the price at which the investor purchased the security, currency, or commodity is the profit or loss.

The key to a successful bear closing is falling prices. The more dramatic the fall in prices, the more profit that the holder of a bear position would gain. The ability to drive down prices depends on the investor’s ability to affect market prices, which is often dependent on the financial resources the investor has available. Holders of smaller positions benefit when other investors start selling a security, currency, or commodity, either through from a concerted effort or because of fear of further falling prices.

Closing a bear position requires an investor to purchase the security, currency, or commodity that was shorted. Bear closing can result in a loss if bullish investors recognize that the price of a security, currency, or commodity has fallen too far relative to its value. In this situation, bullish investors may purchase assets in high enough volume as to squeeze the profitability of a bear position.

RELATED TERMS
  1. Bear Market

    A bear market is a market in which securities prices fall and ...
  2. Bear Trap

    A false signal that the rising trend of a stock or index has ...
  3. Covered Bear

    A trading strategy in which a short sale is made on a long position. ...
  4. Dollar Bear

    A dollar bear is a term for an investor or speculator who is ...
  5. Bear

    An bear is an investor who believes that a particular security ...
  6. Bear Squeeze

    When market conditions force investors to buy back an investment ...
Related Articles
  1. Investing

    Embrace Bear Markets as a Fact of Investing

    Bear markets are a necessary part of investing. Trust your financial plan to get you through.
  2. Investing

    Prospering In The Next Bear Market: Here's How

    Prepare to survive, and even prosper, in the impending bear market, by considering and putting into action the following four strategies.
  3. Investing

    Adapt To A Bear Market

    Learn how your portfolio should evolve to suit bear market conditions.
  4. Insights

    Digging Deeper Into Bull And Bear Markets

    Discover why it's important to know the characteristics of bull and bear markets, the two types of market conditions.
  5. Financial Advisor

    When Will it Be Safe to Buy Commodities?

    When will it be safe to buy commodities (and which ones)? A closer look at the commodities markets and how they move.
  6. Trading

    Profiting in bear and bull markets

    There are many ways to profit in both bear and bull markets. The key to success is using the tools for each market to their full advantage.
  7. Insights

    Are We Approaching a Bear Market?

    The U.S. has seen several deep bear markets since the start of the 20th century, but sentiment anticipating a new downturn may be premature.
  8. Investing

    Commodities trading: An overview

    Trading commodities can seem challenging to a novice trader but we break it down for you. Learn more about the history of commodities, the types of commodities, and how to invest in them.
Hot Definitions
  1. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...
  2. Dividend

    A dividend is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
  3. Inventory Turnover

    Inventory turnover is a ratio showing how many times a company has sold and replaces inventory over a period.
  4. Watchlist

    A watchlist is list of securities being monitored for potential trading or investing opportunities.
  5. Hedge Fund

    A hedge fund is an aggressively managed portfolio of investments that uses leveraged, long, short and derivative positions.
  6. Balance Sheet

    A balance sheet reports a company's assets, liabilities and shareholders' equity at a specific point in time.
Trading Center