What Are Bearish And Bullish Markets?
Investors on the stock market, as well as those on the foreign exchange market, commonly use terms like bear, bull, bearish and bullish. These expressions might sound confusing, but you would be impressed by how many times traders use them daily. The explanation of the terms is very simple, as you will see, and can be very helpful especially when reading financial forecasts and analysis.
Bull market, bullish & bulls
In what is known as a “bull market”, the prices are rising and the curve (on the chart) goes up. In this situation, the market is in a long-term uptrend.
The term “bullish” is used to describe an investor’s sentiment. Investors say that they are “bullish” about gold (for example) when they think that the price of gold will rise.
The “bulls” are people who are optimistic about the price of a certain asset or the market in general. Bulls think that the price will go up and therefore they’re buying an asset so that they can sell it when the price hits a peak. When bulls are the majority in the market, people are investing more money hoping for higher gains.
The famous Charging Bull near Wall Street, made in 1987 by the renowned artist A. Di Modica, represents a market where the economy is thriving.
Bear market, bearish & bears
If prices in the market are going down, we call it a “bear market”. Contrary to a “bull market”, a “bear market” follows a downward trend.
Investors with a “bearish” opinion predict that the prices will go down, along with the market, and they are called “bears”. “Bears” are rather pessimistic about the economy at a given time and the prosperity of the stock market.
The origin of the terms
The origin of the terms “bulls” and “bears” is not entirely known. There are a couple of theories, and here we will present you with the most popular ones. The one connected to the London Stock Exchange in the 1600s sounds the most plausible. Back then, info centers had a bulletin board on which investors could post offers to buy a stock. When there were plenty of offers, the board was rich in bulletins, or “bulls”; and when there was a deficiency in offers the board was bare.
Later, these terms changed into “bulls” and “bears”.
Another one, which is mentioned quite often, has to do with how bulls and bears fight. Bulls strike upward with their horns - pushing prices higher, opposite from bears who strike downward with their paws - pushing prices down. It is important to know that investors can decide to be “bullish” in some markets and “bearish” in others. Likewise, they can be “bullish” in the long-term but “bearish” in the short-term.
Every investor should understand what the terms “bullish” and “bearish” mean. Whenever you check your portfolio, talk, and read about investing and financial market forecasts, you will come across these terms.
On the foreign exchange market “bulls” and “bears” expect either a rise or a fall in prices by going short or long with the asset of interest. Because of the ever-changing economic situation in various countries, traders are adopting new skills and adjusting their style depending on the situation.
2. Bullish and bearish. https://www.nadex.com/glossary/bullish-and-bearish-definitions/
3. (FXCM Team 2015) FXCM Team. Bull Market vs bear Market. https://www.fxcm.com/uk/insights/bull-market-vs-bear-market/ (2015)
4. What is Bull and Bear in Forex Market. https://www.actionforex.com/articles/forex-trading/172544-what-is-bull-and-bear-in-forex-market/ (2019)
5. Where do the stock market terms Bull and Bear come from? Cantech Letter https://www.cantechletter.com/2013/05/where-do-the-stock-market-terms-bull-and-bear-come-from0516/ (2013)
6. Mitchell, C. Definitions of long, short, bullish, and bearish. https://www.thebalance.com/what-do-long-short-bullish-and-bearish-mean-1030894
7. History of the Charging Bull (and How To See It). https://www.thewallstreetexperience.com/blog/story-behind-legendary-charging-bull/ (2020)
8. Equity Marketing Team. Bullish vs bearish markets – what’s the difference? https://www.equiti.com/blog/posts/2018/september/bullish-bearish-markets-difference/ (2018)
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