The world of finance uses words and terms that some people do not understand. The terminology that traders use is among the most difficult and complicated in the financial world. Bearish and bullish markets, stop loss orders, percentage in point (pip), day trading, fundamental and technical analysis are just some of the terms used every day on trading floors across the world.
This article aims to explain in simple words what bull and bear market are. Traders who begin their journey now may find it helpful to know what these two terms mean as they will likely read them in financial articles and news bulletins.
What is a bull market?
The expression “bull market” comes from the way that the bull attacks his victim. The bull will stamp his victim and drive its horns up in the air. When traders are talking about a bull market, this means that this is a market in which asset prices are on the rise. Most of the times asset prices, such as the ones of stocks, bonds, commodities etc., are rising when investors are feeling confident and increase their investments in anticipation of future price increases.
According to a CNBC report published on March 8th 2018, the Dow Jones Industrial Average (DJIA) has quadrupled its value during the bull market that started in 2009. According to Leuthold Group’s analysts, this is the longest and the greatest percentage gain since the end of World War II. The DJIA index hit a 26,616.71 unit all-time high on January 26th 2018, but has retreated since then to 25,178.61 units on March 13th 2018. However, the Leuthold Group’s report noted that despite the market correction in equities recorded mostly in February 2018, the bull market isn’t done yet since “historically cycle momentum highs are usually followed by a push to even higher prices over the next several months.”
What is a bear market?
Just as the bull market takes its name from the way that the bull attacks, the bear market’s name is associated with the way that a bear confronts its rivals. A bear will lower its body and swipe its paws downwards, towards its enemy, when it’s ready to engage. A bear market is exactly the opposite of a bull market, meaning that asset prices are dropping while investors are feeling starting to feel pessimistic about the future market conditions.
Economists suggest that bear markets set in before periods of general economic contractions. The history of US recessions shows that stock market indices record losses months before a Gross Domestic Product (GDP) decline. However, a bear market should not be confused with a market correction since a correction lasts for a limited time period and the indices’ fall isn’t more than 10 percentage points. The most famous bear market in history was the one that occurred in the US stock markets from 1929 to 1933.
STO and trader’s education
Knowing trading terminology makes the planning of a suitable trading strategy easier. STO provides its clients with educational material to help them understand markets and how they can manage risks. STO offers comprehensive educational courses for all levels of traders as well as seminars and webinars which help traders expand their knowledge of trading.
Trading Forex and CFDs, which are leveraged products, are high risk investments and puts your capital at risk. You may sustain a loss of some or all of your invested capital. Only speculate with money you can afford to lose.