What is Bullish and Bearish Market?

June 25, 2018

 

Trading has a language of its own, and if you are starting out long or short, bullish and bearish are trading terms you will hear frequently. Bullish and Bearish are simply terms used to characterize trends in the currency, commodity or stock markets.

 

 

The terms bullish and bearish are often used to describe the conditions in the market or the sentiment of investors.  They are very important terms and are used in nearly all types of trading, from currencies to stocks.  Traders can take advantage of both bullish and bearish markets if they have sufficient knowledge of the market conditions that are associated with these cycles.  When traders understand the meaning of bearish and bullish and are able to identify the cycles, they will know how to profit off of any market condition.

 

What is the difference between Bullish and Bearish Market?

Bearish and Bullish are simply terms used to characterize trends in the currency, commodity or stock markets. If prices tend to be moving upward, it is a bull market. If prices are moving downward, it is a bear market. Of course, this doesn't have to refer to the market overall.

 

 

BULL MARKET

A bull market is a financial market of a group of securities in which prices are rising or are expected to rise. The term "bull market" is most often used to refer to the stock market/Forex Market can be applied to anything that is traded, such as bonds, currencies and commodities.

 

 

Point To Remember about Bull Market:
 

Bull markets are characterized by optimism, investor confidence and expectations that strong results should continue, usually for months or years.

  • Bull markets generally take place when the economy is strengthening or when it is already strong.

  • It happens in line with strong gross domestic product (GDP), and a drop in unemployment and will often coincide with a rise in corporate profits.

  • The overall demand for stocks will be positive, along with the overall tone of the market. In addition, there will be a general increase in the amount of IPO activity during bull markets. 

  • Investors who want to benefit from a bull market should buy early in order to take advantage of rising prices and sell them when they’ve reached their peak.

  • Although it is hard to determine when the bottom and peak will take place, most losses will be minimal and are usually temporary. 
     

 

In times of a bull market, security prices, once again, in certain sectors or as a whole, are increasing and/or expecting to increase and also show signs of increasing at a more rapid rate than the historic average. If a market or the market is bullish, investors gain confidence that the prices of securities will continue to rise over an extended period of time and will invest.  Bull markets often occur at times of economic recovery or economic boom and the psychology of investors plays an intricate role in the market. In order for a market or the market to be classified as a true bull market, technical analysts need to state that there is a rise in the value of the market of at least 20 percent.

 

 

BEAR MARKET

 

A bear market is a condition in which securities prices fall and widespread pessimism causes the stock market's downward spiral to be self-sustaining. Investors anticipate losses as pessimism and selling increases.

The term “bear market” is the opposite of a “bull market,” or a market in which prices for securities are rising or will expect to rise. It is named for the way in which a bear attacks its prey — swiping its paws downward. This is why markets with falling stock prices are called bear markets. Just like the bear market, the bull market is named after the way in which the bull attacks by thrusting its horns up into the air. 

 

Point To Remember about Bear Market:
 

The causes of a bear market often vary, but in general, a weak or slowing or sluggish economy will bring with it a bear market. The signs of a weak or slowing economy are typically low employment, low disposable income and a drop in business profits.

  • In times of a bear market, security prices are decreasing and/or expecting to decrease and also show signs of decreasing at a more rapid rate than the historic average.

  • In order for a market to be considered bare, opposite of a bull market, prices fall by 20 percent or more. 

  • During times of decline, investor psychology turns to fear and pessimism and traders lose confidence in the market.

  • Bear markets slow the market down entirely by becoming the driving force behind unemployment and inflation.

One of the key benefits of forex trading is the opportunity it offers traders in both bull and bear markets. This is because forex trading is always done in pairs, when one currency is weakening the other is strengthening thereby allowing you to take advantage of rising and falling markets. Bull and bear markets are important to pay attention to as they can determine currency market trends. By being aware of market trends, can help you to make the best decisions of how to manage risk and gain a better understanding of when it is best to enter and exit your trades.

 

 

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