Bearish and Bullish Markets

In the world of trading, the terms bullish and bearish are commonly used. Simply put, a bear market refers to one where prices are going down, while a bull market describes a market where prices are rising.

The animals are used to help one remember this better. Consider a bear that is on its hind legs, and consequently he would be attacking downwards. A bull on the other hand will have its horns down and attack by bucking up its head.

When there is a bull market, people will be looking for opportunities to invest as the level of confidence would be high. As a result the acceptance of risk tends to increase. Consequently there will be rises in various markets, including the stock markets and the forex market. Bull markets often lead to a decline in currencies that are considered to be safe, such as the Japanese yen and the Swiss franc. On the other hand, while there is a bearish market, such currencies would strengthen. This is because riskier instruments will typically start to be sold off, leading to safe currencies to be more in demand.

As a forex trader you will be trading one currency against another, and so by taking into account whether there is a bearish or a bullish tendency, you will be able to take advantage of the rising or falling market as the case may be.

Bull and bear markets can determine the currency market trends. As a trader you should be aware of such trends so as to make the best decisions, and be in a better position to manage risk. You would also make more informed decisions as to when it is most opportune to enter and exit trades.

In a bull market, the trader will be looking to enter the market as the prices are rising. Then, he will be able to sell once the market seems to have reached its peak. As bearish markets follow a downward trend, riskier assets will start being sold.

On the other hand, during a bear market, a trader will be looking to enter the market so as to buy as prices would be falling, and ideally when they reach a peak. Safe haven currencies normally strengthen in a bear market since those instruments which are considered to be somewhat risky will start being sold.