In today’s tutorial, we will focus on the topic of the meaning and origin of terms bearish and bullish in trading. What do these two conflicting terms mean? What is their origin? We will answer these questions in today’s article.
What is the history behind these terms? The explanation is quite simple. In the past, bears and bulls fought against each other in a battle circle. It was common in the United States during the gold rush era in California. This bloody sport was eventually outlawed, but the symbolism of the two animals was reflected in modern finance on Wall Street. The terms “bear” and “bull” are believed to come from the way in which each animal attacks to his opponent. The bull pushes its horns into the air while the bear bends down. These forms of attack have become a metaphorical expression of market price movements. Every market moves in these trends (upwards or downwards).
Trend we can divide it into 3 main types by duration:
- Primary – long-term, consists of increased demand, correction and accumulation
- Secondary – backward movements from the primary trend
- Tertiary – short-term daily movements
Primary trend can also be described as bear or bull. In the case of BTC, the primary trend is bullish, and in the long run this digital asset is growing. However, the terms bull and bear market are often used in the short term. So let’s explain exactly what the terms bear and bull trend mean and what types of positions traders use during these trends.
So what do the abbreviations bearish and bullish mean?
- Bullish – We refer to it as a growing trend in the market when the price rises. In other words – the graph is bullish, resp. the price is rising.
- Bearish – Indicates a price drop in the market. If the trader says that the market is bearish, he indicates that the price is falling, respectively. will decline.
Definition of a bull market
In a bull market, assets tend to rise in price over time. This period can last for weeks, months or years. However, this is not an exact term. Instead, it refers more to confident sentiment among investors. In practice, this means that the market has more buyers than sellers. When demand exceeds supply, prices are rising. Bull markets are most common when the economy is growing, unemployment is low and inflation is a bit tame. When someone says they are “bull” in the market, it simply means that they expect a price increase. If the trader expects a rise in price, then it opens long position.
Definition of a bear market
When someone says we’re in a bear market, they believe the assets are going down. This means that sellers exceed the number of buyers. Historically, bear markets have a shorter duration than bull markets. If assets fall for only a few days or weeks, the movement is usually called a “withdrawal” or “correction”. In the crypto market, the corrections are a bit sharper and it is no exception if a correction of 60 to 80% occurs. In the bear market, the trader has the opportunity to open short position, which means that he expects an even bigger drop in prices.