The trends of stock market are usually defined as a Bullish or a Bearish market. A stock market is Bullish when it shows upward trends and Bearish if it is on a downward trend. These terms guide investors in investing in stocks and other financial markets. Higher highs and higher lows are other terms used in an uptrend stock market. Technically if a uptrend persists for 3-4 years then the market is considered as Bullish but if it shows a downtrend for at least 1-2 years then it is known as Bearish market.
Where do the terms come from?
Though actual source of the common use of Bullish and Bearish market is not known but it seems to be derived from the behavior of the bull and the bear. Bulls are by nature heavily built, strong, and charging forward, whereas Bears are know sluggish ,slow and timid; similarly the trends in the stock markets are expressed in terms of Bullish and Bearish.
Another idea of the source of these terms comes from the attacking nature of both the animals is also considered as the mean of derivation of the terms Bullish and Bearish. While attacking their opponents bulls thrust their horns high into the air whereas a bear swipes down at such time. These responses have been symbolically related to the fluctuations in stock markets. Bullish shows uptrend of the stock market while Bearish represents the fall in the market. One of the most common versions of this theory is about the relationship between financial trading and these terms is Gory Disembowelment theory. According to this theory the method of attacking their opponent adopted by both the animals relates these terms with financial trading. When the prices in stock market show upward trend then it is called as Bull market as bull lowers its horns to toss up his opponent. Similarly when the stock prices are at fall then it is called a Bear market as bear swipes his opponent to kill him.
The Bulletin Board theory is another theory that describes the relationship of these terms with financial market. It is based on the conventional trend of London Stock Exchange where people used to buy stocks by posting offers on bulletin boards. When the bulletin boards get full due to abundant offers they were nicknamed as Bull. Similarly the term Bear evolved when the exchange remained bare of offers due to their scarcity.
Our last known theory was introduced by Ben Zier, a language columnist with Wall Street Journal, he explains a more proven and actual theory of use of these terms for financial trading. According to him an old saying – not to sell bearskin before you have – has evolved the term Bearish market. It engaged a large numbers of speculators who tried to make profits with the hope that by the time they will supply the stocks their prices will go down. The behaviors of these bear skin sellers later on become the symbol of falling market. Though he had described the link of Bear with financial trading but he could not explain the evolution of Bull. This theory comes from traditionally people dealing in bearskins would sell them, even if they did not have in ready stock, at a speculative price in the hope of their downward trend. Such people were recognized as Bears which was later on used to represent the market showing downtrends. The uptrend market was known as Bullish market as bulls are usually considered opposite to the bears.
In financial trading the terms Bullish and Bearish market help in knowing the up or down trend of the stock market. When the prices f the stocks in the open market are at downward trend then it is supposed to call the market as Bearish whereas upward market tends are described as Bullish market. There are several theories that can help you in understanding their relationship with financial trading and investing.
Examples of bullish and bearish on specific financial assets
You will have to study some examples of trading of financial assets to understand the relevance of the terms of Bullish
and Bearish markets with investing in stocks. Identifying and measuring the trends of stock markets is not a matter of art only but a scientific matter also. You will have to consider certain market situations, given here under, to measure the Bullish and Bearish trend of the market.
One of the more traditional methods of measuring market trends is the market is to be Bullish if the prices of 80% of its stocks are at rise.Another method of measuring market trends is that if the indices of the stock market rise by 15% then it can be said to be Bullish.
In fact different stock markets show different trends in different market conditions depending on various factors including sentiments of the investors and economic conditions as both of them play crucial role in moving the trends of stock markets. Click here for brokers that feature market impact calendars. These brokers feature services that will show you the events that can make a stock market of a country be Bullish if its economy is strong or bearish if economic reports are weak. For example, an economy will release there employment level reports which can encourage them in investing in stocks which will make the market Bullish.
A market can also be Bearish or Bullish if the confidence of its investors increases or drops as indicated by major events. This come from things like Boeing recently announcing a large cancelation of airplanes. The investors will start predicting about their how their investment will perform ultimately causing a bearish trend at first and then a bullish rebound from predicting that something better is going to happen n the market. Though it is not easy to measure the effect of sentiments of the investors on a Bullish or Bearish market you can still see clear market trend after major new events in the company.
However bullish or bearish trends often change in a gradual process. Initially when the stock prices are at low the investors remain sluggish about their future. With steady increase in trading activities when stock prices start increasing investors become optimistic towards them. The stock market becomes Bullish with the increase in trading activities and yielding dividends on investments. Ultimately increasing IPO activities, speculations and trading activities start controlling the trends of investing in stock market.