The Story Behind Bulls and Bears

17 mar 2023

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This is The Story About Bulls and Bears. Bulls can lift things up, Bears can eat you for lunch.


Who Are The "Bulls" And The "Bears" In The Market

The terms "bulls" and "bears" are included in the trader's slang as the main categories of players in the market. Understanding the technique of the game will help you to understand the intricacies of how the market works.

"Bulls" are buying investors. Like their totem, they lift the enemy up on the horns. "Bulls" buy, wait for the rising rate and sell at a higher price. They dream of a prosperous economy: the lower the unemployment rate, the higher the GDP, the faster markets grow. Warren Buffett - the most famous representative of the bulls .

The Bears play on the opposite side. They earn on the depreciation, in a fading economy. Their ideal world is high unemployment, low GDP and large-scale crises.

It all starts long before the collapse of the market: the “bears” buy on credit and immediately resell, artificially creating a drop in prices. After the price becomes cheaper, they are purchased again, but at a lower price, and the debt is repaid. The difference between the first and second purchases is the profit of the bears.


💲How Bulls Make Money On The Market 💲

"Bulls" buy, when they are sure that the market will go up. Examples of situations where this is possible:

🟣 the shareholder enterprise has published a financial report, and the figures exceeded forecasts;

🟣 the new reform allows to pay less taxes, thereby increasing profits;

🟣 the company has introduced a new product, which, according to analysts, will be in great demand;

🟣 the level of well-being, salary and solvency of the population are growing, which has a beneficial effect on the company's profit.

Bullish trades take time – you have to wait to make money. "Bears" are distinguished by shorter trades and the prospect of quick earnings.

A red flag for the bulls is an increase in prices by 20% from the lows and the presence of strong prerequisites for further growth. The most favorable moment comes when there are more buyers than sellers on the market.


📍 There Are 4 Key Phases Of A Bull Market:📍

1️⃣ "bearish" trends are gradually fading;

2️⃣ the backdrop of negative news has ended, but there is no confidence in future growth yet, the market is moving sideways, the growth of prices alternates with a fall;

3️⃣ the economy is going up, volatility is decreasing, investors are optimistic;

4️⃣ the peak of growth, traders make easy profits.

The market trends are cyclical, a bull market becomes overbought over time and inevitably turns into a bear market. The move up can be uneven, with periods of pullbacks and corrections, that provide an opportunity to profit on counter-trend trades.

As a rule, prices didn't rise as quickly and unpredictably as they fall. Therefore, transactions in the "bullish" market are characterized by a longer period, the so-called "long positions". Both own and borrowed money, shares and other assets, which are returned after closing, act as collateral.

Long positions are considered more stable, predictable and calm. Therefore the majority of market participants are "bulls" (or consider themselves so). In an uptrend, it's easy to choose an investment because almost everything goes up. However, the "bulls" need to be careful and remember, that there is no eternal growth, the market can be oversaturated at any moment, turning in the opposite direction. It is important for conservative traders to exit the game on time.


💲How Bears Make Money On The Market💲

The bears enter the arena during a downturn in the economy and prices. Their tactic is to sell at the beginning of a downtrend and then buy at the end of a downtrend. If they guess the high and low points of the bear market, they will receive the maximum margin.

Examples of situations, that will play into the hands of this category of traders:

🟣 there were large-scale economic crises, force majeure situations, natural disasters, epidemics, wars;

🟣 the shareholder enterprise found itself in the center of a scandal or changed its general director;

🟣 sales of the new product failed.

A "bear" market comes into its own, when prices fall by 20% from the maximum.

There are 4 main stages of the trend:

1️⃣ the bull market is oversaturated and goes into overbought phase;

2️⃣ against the backdrop of negative sentiment, prices fall sharply, and trading activity decreases, panic arises on the market;

3️⃣ prices fell quite strongly, but continue to gradually decline, at this time “bears” enter the market en masse;

4️⃣ seduced by cheaper prices, conservative investors become more active, due to which the market gradually turns in the opposite direction.

Thus, the "bear" market is gradually replaced by a "bullish" one.


Can a Bull become a Bear?

In fact, these divisions are rather arbitrary, they were created by exchange slang. Officially, in the market, you do not need to indicate yourself in which category you belong, so no need to be a bull or a bear all your life.

Traders' strategies are good because they can be adapted or completely changed to specific conditions on the exchange. It's not always possible to sell shares at the maximum or buy at the minimum price, so you have to adjust to the average attitude. Therefore, a “bull” can become a “bear”, just like a “bear” can become a “bull”.


Conclusion: What are Bulls and Bears in Trading?

Bulls and Bears are two sides of the stock market. Bulls are traders who believe that the stock prices will go up, while bears are traders who think that the stock prices will go down. In trading, these two forces are constantly at work, and understanding their roles can help you make better decisions when it comes to investing. Bulls and Bears play an important role in trading as they provide insight on the direction of a particular security or market trend. By understanding their roles in trading, investors can more accurately predict future price movements and make more profitable trades.


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