This article was made because in the Forex world you will often her the terms “Bull Market” and “Bear Market”. But these terms have a different connotation in forex – they’re not as simple as in the stock market because they coexist. I’ll also try to give you some tips for you to net some profit in both of them – it’s not that hard, just make sure you use the right tools for the right kind of market you’re thinking about riding.
So, without further delay, let’s get to it.
Explaining Bears and Bulls
As stated earlier, you will often see these terms on forex related publications, guides, books, chat rooms and informal conversation between FX traders, but what do these terms mean? Well, you might know by now, but here’s the explanation:
Bull Market: Bull Market is the concept that says the general mood of the market is going up, that means the market is globally rising. Ever wondered why many of the online brokers have bulls or horns as symbols? Well, it’s because almost everyone likes Bull Markets – except those heavy short bidders.
Bear Market: The Bear is the Bull’s antagonist in the Forex Trading world. That means that there are more sellers than buyers and that the general trend is going down. Bears aren’t as popular as bulls on the forex world, but they are equally profitable – you just have to ride the bears and bulls in the right direction.
In the FX world bears are constantly fighting with bulls – this means that each bull has an evil twin brother – a bear – because on the forex world currencies are measured against each other. If the USD is experiencing a bear against the JPY, the JPY is experiencing a bull. I hope this clarifies this point. Let’s proceed to get some great tips on riding these markets.
Bull Market: Profit Tips
So, as explained before, the bull market’s power is in its rise – this means the trend is going up. As the trend is going up with a certain degree in stability (take the USD Bull Market that lasted from 1983 to 2007 as an example) the best option here is to go with long positions.
A long position is when you buy low and sell high. So, avoid short positions and get in the long bandwagon – think outside the box, why not trying binary options?
Indeed binary options are the best option here, they offer you a way to ride the stable trend with less risk involved. How do binary options work? Well you simply invest and tell which way the market is going to go. When the timer finishes, if you were right you profit. Try it.
Bear Market: Profit Tips
There are those that say there is only one way to profit during a bear market: by staying out of the market. The profit, they say, is not losing money.
I firmly disagree with these people. I made lots of money during Bear Markets and the only thing that I can point out? That it is much more risky to profit from a Bear Market than from a Bull one.
Now I hear you asking: “So what are my options? How can I profit from a Bear Market?” Well, there are three options:
- Binary Options: Remember the binary option trick in the bull market part of the post? Well do the same, but reverse it. The bear market is a stable trend (like the bull market) except that instead of going up, it’s going down. You can profit from this trend the same way – dealing in binary options are predicting the price will fall. In case you didn’t notice, there are a lot of hungry bears out there on the FX world (the weak currencies are rising leaving some stronger ones, like the dollar, to fall). Get to work!
- Buying Short: This is a type of trade that gets many traders confused. Traders are used to buy low and sell high – well, in short orders, you are selling what you don’t own. Let’s look at the stock market for a simple example. If you deal short, you are selling shares you don’t own and will later buy them out to close the order. If the price drops like you anticipated, you will profit. The risk here is that if the price rises, you may become in debt, not only losing your investment but also having to pay from your own personal pocket. Yikes!
- Reverse Buying: As you probably know (I even mentioned it early on) bear markets all have their twins, so if you are used to investing in the USD/EUR pair and you see it’s suffering the bear market’s effects, well, you probably should buy the EUR/USD pair, as the other currency is experiencing a bull market – it’s pretty obvious, but sometimes newbies forget this is the case.
Anticipating the Bear and Bull Markets:
What? Are you sure you aren’t confusing this with the Stock Market? In the stock market bull markets and bear markets have to be predicted and one doesn’t happen at the same time like the other, but on the forex market it doesn’t work this way. As I stated earlier, the FX market is always having bull markets on one side and bear markets on the other. It’s constant, you don’t have to predict them, you just have to make sure you’re riding in the same direction as you investments. But don’t let it make you think that this is easy – it requires practice and effort, just like any other FX aspect. Practice makes perfect.
So, this concludes this article. I hope I’ve been able to shed some light on your head regarding these terms and explaining the difference between the bull market and the bear market, the stock market and the forex market and the long bids versus their short counterparts. If you still have any doubt, feel free to leave a comment with it on the commenting section.