What is a bear market rally?
In one line: A bear market rally is a strong bounce in prices during a longer downtrend. It can look like a new uptrend, but the bigger fall often carries on.
A simple example
An index falls from 5,000 to 3,800. That's a 24% drop, deep enough to be called a bear market.
Then it bounces to 4,250 in three weeks. That's a gain of about 12%. Headlines say "the bottom is in."
A few weeks later the index slides to 3,600, a new low. That 12% bounce was a bear market rally: a real move up, inside a bigger move down.
Why it matters
Bear market rallies can be fast and strong. Some are among the biggest up days of a whole year. That's why they're easy to mistake for the start of a new bull market (see Bull and bear market).
The chart gives you a better clue than the headlines. A Trend up needs higher highs and higher lows. In a bear market rally, price often bounces but fails to beat the last place it turned down from. Then it makes a lower low.
More on reading this in higher highs and higher lows.
A common mistake
Going all in on the first big bounce. One strong week doesn't change the bigger trend. Price has to show it, step by step.
Check the bigger chart first. If the weekly chart still shows lower highs and lower lows, treat the bounce as a bounce until price proves otherwise.
Size every trade from your stop, so being wrong stays small. The position size calculator does the math.
Questions
How big is a bear market rally?
There's no official size. Many people use 10% or more off the low. Some rallies inside long bear markets have been 15–20% before the fall carried on.
How is it different from a dead cat bounce?
They're close cousins. A Dead cat bounce usually means a small, weak bounce. A bear market rally is often bigger and lasts weeks.
How do you know when a bear market is really over?
Only in hindsight. On the chart, a new uptrend shows as a higher low followed by a higher high on the bigger timeframe.
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