Learning about "The Bulls and the Bears".

What is a bull market?

The financial markets for stocks, bonds, and commodities are greatly impacted by consumer confidence. And in bull markets, which occur when investment prices are on the rise for sustained periods, confidence is soaring. Propelled by the thriving economies and low unemployment that usually accompany bull markets, investors are eager to buy or hold onto securities, thus creating a buyer’s market.

Throughout history, the bulls in U.S. markets have had some great runs, starting with the boom after World War II that exceeded the market’s peak before The Great Depression. Since that time, the market has experienced a series of bull markets, including the longest one from 2009 to 2019, which was on the heels of the collapse in the U.S. housing market.

But, as history has shown, bulls don’t run forever.

What is a bear market?

While bull markets are fueled by optimism, bear markets — which occur when stock prices fall 20% or more for a sustained period of time — are just the opposite. Bulls are generally powered by economic strength, whereas bear markets often occur in periods of economic slowdown and higher unemployment. Instead of wanting to buy into the market, investors want to sell, often fleeing for the safety of cash or fixed-income securities. The result is a seller’s market.

Bear markets can last from a few weeks to several years. The first and most famous bear market was The Great Depression. The dot com bubble in 2000 and the housing crisis of 2007–2008 are other examples.

Learning more about "The Bulls and the Bears"

When looking at the future, many traders will have an opinion on where a currency is going. If a trader is optimistic and thinks a currency will rise, he is said to be "bullish". If the trader is negative and expects a currency to fall, he is said to be "bearish". Every day, the bulls and the bears do battle and the price moves as one or the other gets the upper hand.

Our job as forex traders is to look at the currencies available to us and to buy the strongest while selling the weakest. So, if after reading the news you became bearish of euros and bullish of US dollars, you could trade that opinion by selling euros and buying US dollars.