As an avid trader or a simple observer of financial markets you have often encountered the term bullish or bearish market, and markets are often described as bullish or bearish. But what exactly does it mean when analysts announce that the market will be bullish, or warn that the market trend is bearish? Understanding the bullish vs bearish markets is important for the trader to navigate the different market conditions and see their various effects.
Bullish vs Bearish Explained
Experts in the financial sector often refer to markets as bullish or bearish based on price movements that are either positive or negative. And when analysts throw the word “bear market” or “bull market” they describe whether the market is optimistic (going up or may rise) or hopeless (going down or possibly down). The main difference between bullish and bearish markets is that confidence is high and prices are rising or low and prices are falling.
Specifically, the words bullish and bearish describe the real market situation – if it gains value, or “uptrend,” or loses value in “downtrend.” These methods are often affected and reflect the feelings of the sellers and whether they are buying or selling. Market prices and commodities often rise in the middle of the good news and fall when there is a bad distribution. Sometimes certain groups may try to influence prices, but in a large market like forex this does not happen.
What is the Bull Market?
A bull market is a financial market (whether in currencies, metals or commodities) where prices rise or are expected to rise. General optimism, investor confidence and expectations of strong sustainable development reflect the bull market. These conditions usually last for weeks, months, or even years, but they can be as short as a few days, depending on the circumstances. Predicting a change in trends is sometimes difficult as the seller’s psychology and speculative behavior can play a role.
Markets become stronger when the economy is performing well or coming out of a previous recession. For example, individual revenues may rise in line with the strong GDP effect, or fall when unemployment figures or interest rates are not favorable. Consumer strength and demand still dominate the bull market, so weak supply but strong demand (such as in the case of commodities such as oil or natural gas) will see rising prices as more investors want to buy goods than they are willing to sell.
What is the Bear Market?
The bear market is the opposite of the bull market. This market situation is characterized by falling prices and an optimistic attitude. Traders start to sell rather than buy as they try to get out of losing positions, and the start is often bad economic news or statistics such as low employment. The start of the bear market is related to psychology, as traders do not believe that something wrong will happen before it happens and take action by selling goods to avoid losses.
The bearish market can therefore be a self-fulfilling prophecy, in which a large number of hopeless traders may begin to decline by selling the stock in earnest in anticipation of a drop in price, but actually causing the price to decline on their own. This can make others feel nervous and out of place. The trend is reversed, however, when speculators enter and buy at a lower price and prices rise slightly as traders are dragged back, leading to a bullish bullish market.
You can benefit from both bullish and bearish markets
Traders who are familiar with the conditions described above are offered and how to move, can benefit from both the bullish and bearish markets. If you understand the meaning of bullish and bearish, you can accurately identify the cycles and when and how you benefit from them. It is possible to make money during a sinking market, and whether prices go up or down, a smart trader can come out on top.