If you’re in the trading business, you should be using a bearish indicator. You need to apply this tool to help you determine whether you should get out of a security position. Using a bearish indicator helps forecast whether the security is getting ready to enter bearish territory.

Several technical indicators are of use as a bearish indicator. For example, you can use the RSI indicator, which helps you to see if the market has reached the bottom or top. When it comes to using a bearish indicator, consider doing the following:

1. Employ rising volume as a bearish indicator.

2. Use RSI as a bearish indicator.

3. Apply price as a bearish indicator.

Action Steps
The best contacts and resources to help you get it done

Use rising volume as a bearish indicator

When you're studying charts, you should always consider studying volume for worthwhile bearish indicator information. If you notice that the stock's prices are decreasing, and the volume is high, most likely investors are selling the stock. You should take this as a warning sign that you may want to exit from your position. On the other hand, if the stock's price is declining, but the volume is low, it's possible that the stock is in a correction mode. The stock may still be strong, but there's just not much activity at this time.

I recommend: Stockcharts is a great resource; it provides great bearish indicator training in that it shows how a stock looks when it’s about to enter bearish territory. You’ll also want to look at MarketWatch. This website gives good bearish indicator advice.

Employ RSI as a bearish indicator

The RSI (relative strength index) is another technical indicator widely used by traders. Traders use the RSI to seek to determine if the stock is overbought or oversold. If you see that the stock is at 30 or below, it's considered oversold, which can be a bearish indicator. However, traders can use this point to set up a buying position.

I recommend: Tradestation offers advanced technical indicators; the RSI is one of them. This software is widely used by traders all over the world. Incredible Charts also allows you to use the RSI on your chart.

Put price into play as a bearish indicator

Price is the most important factor to consider when it comes to a bearish indicator. If the stock's price is declining, price should be your first line of defense when considering exiting. Another detail to watch for, regarding price, is if it drops significantly. This can signal the start of a sell-off, which means that the stock might be entering a downturn.

I recommend: Investor’s Business Daily explains bearish indicators in understandable terms so you don’t need to hire a bearish indicator consultant. Barron’s is also another resource that provides help with bearish indicator, including information such as the price’s percent change.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  If you're using the RSI indicator, and the stock reaches 70 or above, it can be considered oversold. You can use this as a bearish indicator to interpret that a sell off is about to begin.