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What is Bullish and Bearish Market?
Written by: PaxForex analytics dept - Friday, 15 September 2017 0 comments
The definition of a market trend is simply the movement within a financial market over a period of time. Using varying forms of technical analysis, market trends are recognized in order to help predict price in response to the course of the market. 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.
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.
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.