Bullish vs Bearish: Guide to Understanding Different Market Conditions

To help investors fully understand what does bullish mean in stocks, it is typically defined as a market condition where the prices of stocks rise by up to 20% or more after a recent low. The majority of the time, you can equate long with being bullish, just as you can equate short with being bearish. If you’re only talking about individual stocks, you will generally be safe.

Stock indices that track the entirety of the market can be reliable investments in the long term. No bullish market lasts forever, which is why investors must carefully consider the possibility of the market dipping. Periods of inflated success are classified as bubbles, and as we all know, bubbles tend to pop eventually. The popping of said bubble is often difficult to predict, though skilled investors seek to kelly matthews, author at forexbitcoin anticipate these bursts far in advance. In the stock market, you can either be long or short stock. If you are long shares of Apple (AAPL), for example, you actually own part of that company.

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Bearish candles can indicate a reversal in a bullish trend. And bullish candles can indicate a reversal in a bearish trend. Bullish sentiment means the majority of people in the market think prices will go up. Bearish sentiment means the majority think prices will go down.

• If you are “long” a “put contract”, you are betting that the market will go down in value.
• The selling will slow and the market will turn from bearish to bullish.
• As a trader, you may agree with this sentiment and become bearish on stocks with the anticipation of a specific company’s shares dropping or a stock index declining.
• If a stock has been holding above VWAP all day and it’s after 2 p.m., that’s a very bullish indicator.

A bearish market is identified by falling prices with a pessimistic outlook. The gloomy market perspective means that the prices are assumed to keep falling in the future. As a trader, you start selling the currency pairs as soon as you realise that you have entered a bearish forex market. It occurs mainly due to a piece of bad economic news like an employment decrease or a calamity shaking up the economy like the global pandemic. A bearish market can also be known as a self-driving phenomenon.

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Bearish periods of over two periods (3-month periods) represent a recession. Recessions lasting for several years are classified as depressions. The origin of the labels comes from the way each animal attacks their prey in nature. It is said that a bull thrusts its opponent upward with its horns while a bear rips its prey to the ground. Thus, when applied to the market, each animal represents the movement they perform in nature.

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Now that you are familiar with bullish vs bearish meaning, how do you identify each of them? Generally, bullish and bearish markets have unique indicators that investors can use to identify them when studying market trends. So what does bullish mean from a stock market investment perspective?

Investors may be bullish about the overall market if they expect the economy to perform well, or bullish about a specific stock if they expect the company’s profits to grow. The downturn was driven in part by falling prices among the largest US technology companies. The sharp falls in some of these tech names resulted in a bigger hit to US stocks than to other global stock markets and indexes. With valuations for US stocks still high, and unemployment very low (and therefore at risk of rising), there is further room for US stocks to fall, Oppenheimer writes.

This is not an offer to buy or sell any security or interest. All investing involves risk, including loss of principal. Working with an adviser may come with potential downsides, such as payment of city index review fees (which will reduce returns). Past performance is not a guarantee of future results.

Bullish vs Bearish Strategies

Buying in a bull market is pretty obvious and straightforward. The bear market can trip people up because you can make money as prices are falling; you can also lose if you short a stock and the price goes up (forcing you to “cover your loss”). In bull markets, where prices are rising or expected to rise, there are usually more traders taking long positions. Investors often adopt a ‘buy and hold’ strategy, acquiring stocks early in the trend to sell at a higher price later. This long-term strategy aims to capitalise on the market’s overall upward trajectory, assuming continued growth over time. You can trade the bullish market by placing a long or buy order on the trade with an expectation of the prices rising in the future.

• When a bull market is in full swing, sentiments are optimistic.
• The anticipation of this drop in asset value can be important in determining how a stock will recover from periods of economic uncertainty.
• When stock prices go up, it reflects investor confidence in the market.

For more details, see Form CRS (conversation starters) and Form ADV Part 2A. This underperformance means companies are not actualizing returns to investors. If recessions last for multiple quarters, they may turn into depressions. Economic depression is a symbol of underperformance by a given economy.

Bullish vs bearish markets summed up

When you believe a stock’s price will fall, you borrow shares from your broker and sell them short on the open market. You cover once your profit target has been hit (the stock moves lower). Seeing the bullish vs. bearish candlesticks and patterns helps you know which trading strategy would work best in any situation.

We believe everyone should be able to make financial decisions with confidence. “Whenever the US has experienced a fall of more than 10%, other equity markets also metatrader web fall — even if, on occasion, they outperform on a relative basis” Oppenheimer writes. Jarden’s Bull & Bear Index shows that analyst sentiment remains broadly positive but it is shifting underneath the surface as seen when breaking it down by sector. Business services, on the other hand, are seeing more neutral and bearish calls.

The second candle will once again engulf the first candle — starting higher and finishing lower than the first. While this can be an indication of the trend reversal, it’s not a guarantee. I always consider several indicators like volume, time of day, and catalysts before I take a trade. Check out the S&P 500 daily candle chart to get an idea of what a strong bull market looks like. Beyond that, bullish and bearish are more like concepts. Personally, I think the market was long overdue for a correction after over 10 years of a bull market.

But I’m still prepared to trade through it — and to teach you how too. Access my no-cost, two-hour “Volatility Survival Guide” to learn how to ride the wild momentum. When a small bearish candle is completely engulfed by a larger bullish candle after a downtrend, buyers are essentially declaring, “We’re taking control now.”

The S&P 500 fell by about 50% in over 17 months as the housing market crashed and the banking crisis unfolded. At the end of the day, terms like bullish vs. bearish are just another way of saying up or down, buy or sell, long or short. The key to making money in the market is to be on the side of the more powerful force. When the bulls have the upper hand, I stay on the long side. When the bears have the upper hand, I watch for a hot sector. It’s easy to spot a bull market — the S&P 500 will trend up and post new highs.