What are bears and bulls in trading. An Overview of Bull and Bear Markets
Investors use the terms "bearish" or "bullish" as a quick way to describe their market sentiment regarding specific securities or financial markets.
The Bulls, the Bears, and the Farm
A bear market refers to a decline in prices, usually for a few months, in a single security or asset, group of securities, or the securities market as a whole. In contrast, a bull market is when prices are rising.
Key Takeaways A bull market is a market that is on the rise and is economically sound, while a bear market is a market that is receding, where most stocks are declining in value.
The actual origins of these expressions are unclear, but one reason could be that bulls attack by bringing their horns upward, while bears attack by swiping their paws downward.
The Bottom Line In the investing world, the terms " bull " and " bear " are frequently used to describe market conditions. These terms are used to describe how stock markets are doing in general—that is, whether they are appreciating or depreciating in value. And as an investor, the direction of the market is a major force that has a huge impact on your portfolio.
A second explanation relates to early stock market participants and how they could benefit from either an up or down trend. A secular bull market and a secular bear market are terms used to describe long-term patterns of wealth creation or destruction in a stock market above and beyond regular volatility, especially when accounting for purchasing power changes due to inflation or deflation.
While the terms are relatively simple to understand, the impact either a bull or bear market can have on your portfolio and wealth is undeniable. Both animals are known for their incredible and unpredictable strength, so the image that each evokes in regards to stock market volatility certainly rings true.
Bulls and bears: What do they mean? If you are a beginner investor and looking to invest in the share market, the understanding of a Bull and a Bear market is important for success.
Interestingly enough, the actual origins of these expressions are unclear. Here are two of the most frequent explanations given: The terms "bear" and "bull" are thought to derive from the way in which each animal attacks its opponents. That is, a bull will thrust its horns up into the air, while a bear will swipe down. These actions were then related metaphorically to the movement of a market.
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If the trend what are bears and bulls in trading up, it was considered a bull market. If the trend was down, it was a bear market. Historically, the middlemen in the sale of bearskins would sell skins they had yet to receive.
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As such, they would speculate on the future purchase price of these skins from the trappers, hoping they would drop. The trappers would profit from a spread—the difference between the cost price and the selling price. These middlemen became known as "bears," short for bearskin jobbersand the term stuck for describing a downturn in the market. Conversely, because bears and bulls were widely considered to be opposites due to the once-popular blood sport of bull-and-bear fights, the term bull stands as the opposite of bears.
Literary Evidence for Bear According to Merriam Webster, the term "bear" came first: "Etymologists point to a proverb warning that it is not wise 'to sell the bear's skin before one has caught the bear. One of the earliest references of the term "bear" used to describe a marketplace transaction came in from Richard Steele, publisher of the British literary and society journal, The Tatler.
In an essay, Steele defines a "bear" as an individual who places a real value on an imaginary object and thus is said to be "selling a bear. In the book, Defoe writes " The Russian bear attacks the Afghan wolf, to the dismay of the British lion and Indian tiger.
Bull (stock market speculator)
This relationship to speculation seems to have at least partial origins from the gruesome blood sports of bull and bear-baiting. These contests began in medieval times around the s and reached their height of popularity during the Elizabethan era.
People would flock to the events and gamble on the outcomes, betting vast sums of money on a contest featuring a bull or a bear. It's not hard to see how this corresponds to the usage of the terms in today's stock market speculations. Shakespeare's plays make reference to battles involving bulls and bears.
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In Macbeth, the ill-fated title character says his enemies have tethered him to a stake but "bear-like, I must fight the course. Tush, fear not, man; we'll tip thy horns with gold And all Europa shall rejoice at thee, As once Europa did at lusty Jove, When he would play the noble beast in love.
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Bulls and bears: The beasts of the finance world
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