One of the toughest parts of learning how to trade successfully in any environment, is getting used to a change in language. When you start looking for opportunities to invest your hard-earned money with the hopes of growing your wealth, you’ll be presented with terms like forex, paper trading, penny stocks, and more, that you may not understand at first. Two of the most common terms you’ll hear are “bull” and “bear”.
Though neither of these two options sound particularly friendly, it’s worth noting that your trading strategy will change depending on whether the market is in a bull or bear state. Before you get started with a forex broker like easyMarkets, let’s take a look at what bear and bull investments should look like for you.
What is a Bear or Bull Market?
The terms bear and bull are regularly used to describe the current status of the stock market and how they’re doing in general. One animal highlights the fact that assets and currencies are currently increasing in value, and the other suggests that value is decreasing. Additionally, because the forex atmosphere, like many environments, is often determined by investor attitudes, the terms can also be used to define how people feel about the ensuing trends of the marketplace.
A bull market refers to a currency that’s on the rise on forex. It’s typified by a sustained increase in the earnings that you can get from trading certain currencies back and forth. Usually, when the market is bullish, investors have a lot of faith that the uptrend will continue and remain positive in the long-term. In this environment, things are overwhelmingly positive. Alternatively, bear suggest that the value in investing in a certain currencies is actually declining. The price of the money that you’re buying might be dropping because of changes in the current political landscape or issues with the overall economy in general. During a bearish environment, the economy starts to slow down and unemployment may be on the rise.
How to Prepare for Different Markets
While it’s not always possible to predict what kind of overall state the market will be in at any given time in forex, you can make sure that you’re always prepared for the worst. Assessing your capacity for risk and coming up with a strategy that’s suitable for use in any style of investment – no matter what it may might look like – will protect you from having significant losses in the long term.
After all, while it’s scary and often risky to invest in bearish markets, there are still opportunities if you know where to use your money and how to make the most of the fast-paced forex environment. Additionally, while bullish environments are generally more positive and welcoming overall, that doesn’t mean that they don’t come with challenges that today’s spenders need to be aware of. Understanding how your environment works in every scenario is the key to ensuring that you don’t lose more money than you win in the long-term.