You often hear the words bullish and bearish from traders. These words may sound foreign to you but here, we will discuss these terms as simple as possible. Basically, the terms “Bull” (bullish) and “Bear” (Bearish) are used to describe the overall financial market is performing in general. Bull market means that the trend is going upwards meanwhile bear market means that the market is going down. Remember that a single day cannot tell you whether the market is in bullish or bearish form. It takes weeks or months to tell which direction the market is heading.
What happens in a Bull Market?
In a bull market, investor confidence or traders is high. This usually means that there is optimism and positive expectations that good results will continue. The bull market occurs when the economy is doing well. This is usually related to the equity market in high. Despite being related to equity market it applies to all financial markets like currencies, bonds, commodities, etc.
What happens in a Bear Market?
The bear market means that a negative trend is happening in the market. Investors sells riskier assets as those from emerging markets. The chances of loss are far greater because prices are losing value. When the bear market happens, investors or traders would most likely be better off short-selling or move to safer investments.
Why does it Matter?
Forex trading is always done in pairs. If one currency is weakening the other is strengthening. You can trade both ways meaning you can take a long (buy) or short (sell) view in either currency pair. With this, you can take advantage of the rising and falling markets. By determining the bull and the bear trends, you get to know which is stronger and which is not. Understanding the market trends properly can make a trader decide better on how to manage risks and when to enter and exit trades. As forex trading is always done in pairs, buy the strength and sell the weak should be your trade.
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