A lot of people who are new to trading may find it hard to understand the various terms that are floating around. This is completely understandable, but by understanding these terms, you can be sure to make the most out of any investments that you make. Bearish trends, and bullish trends are used to try and describe a certain action in the world of Forex. If the prices are moving upwards, or if the trend seems to be showing this then this is known as being a bull market. If the prices happen to be moving down then this is known as being a bear market. This can refer to a market overall or it can even refer to a specific asset. Words like this can even be used to refer to traders who think that a trend is going to happen in the future, even though it hasn’t actually shown any indication yet.
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So why do we use bears and bulls? The origins of this are not clear at all. There are however, numerous theories around but nobody can seem to agree on any one of them. One idea is that the line on a graph corresponds to the movement that the animal makes when it is in a fighting stance. For example, bulls go forward and then upwards, and then a bear will swipe downwards with their claws. Another theory states that English merchants would speculate on the price and sale of bearskin. They would sell the skin before the bears themselves were killed in hopes that the market price would fall when the skins were ready for delivery. This would make their transactions even more profitable, but as stated above, there is no one theory that people can agree on.
So what makes a bull market? A bull market usually happens when there is an economic indicator that things are going to look up soon. When you have a bull market, things are looking good. This could be due to high employment or it could even be due to the economy. If there are more people in employment then people are going to be spending more and they are also going to be investing more as well. Not only does this make the prices go up, because it also helps to contribute to confidence in the business sector and even the currency sector as well. This helps the market to rise up even further, so it’s very easy to see how all of this is very connected.
That brings about the question, what causes a bear market? A bear market happens when the market sentiment happens to be low. This could be driven by the fact that people are no longer in employment or it could be down to the fact that the economic data is very negative. If you want a good example of a bear market then this would be the Great Depression. This happened in the 1930’s and it was actually the Wall Street Crash that triggered this. This happened to take place in 1929, and it caused the whole market to snowball. Up and down movements happen on a regular basis in the market, and it is usually normal. If something takes a serious swing however, this can be bad news for traders.