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Positive news on the base currency may also lead to the trend change. In this case, the bears will not be able to hold the market and will start closing existing deals. The bullish market may exist until negative news is released or before moving into an overbought zone.
First of all, trends can be determined using the price chart. If we are talking about an uptrend in the market, then each subsequent maximum should be higher than the previous one, and each subsequent minimum should also be higher than the previous one.
Then we can speak about the current trend as upward in the market. Another common way to determine whether the market is bullish or bearish is trend indicator, Moving Averages. It has a form of a curve, which changes depending on the direction of the trend.
A combination of two moving averages is usually used. The day and day MAs are widely followed by traders. When the price moves above the curve, a bullish signal is formed. If the price moves below the MA, a bearish signal occurs. When the price crosses the curve, the trend is likely to reverse. Taking into account angle of slope, one may determine the potential direction and the strength of price movements in the market.
If you are a novice trader, test the strategy and indicator on a practice account. Open a demo account and try your hand at trading without risks. To sum up, the sentiment of the market participants strongly depends on the exchange rate dynamics. When the bearish trend is observed, traders start selling actively, and prices fall. When the bull trend changes the bearish one, traders start buying to resell at a higher price.
Action Forex. What is Bull and Bear in Forex Market. By JustForex. Feb 12 19, GMT. Download our Free Forex Ebook Collection. Being an international broker and working with clients from different countries we understand that every person is unique with his own values, no matter whether he is a trader or a partner. When our team develops the services of the company, we take into account the variety of cultures, nations, trading experience and demands of our clients.
JustForex offers several trading account types with a wide choice of trading instruments and everyone can find the most suitable one according to his preferences. Featured Analysis. Load more. Learn Forex Trading. This strategy is risky, because only a very highly-skilled analyst will be able to tell for how long the drop will last.
Additionally, the retracements are mostly noticeable on small timeframes. Timeframe is a period of time chosen to be displayed on the chart. Full swinging. Swinging cannot fully be described as a bullish strategy as it involves both sales and purchases within the chosen period of time.
This usually looks as a series of long positions interrupted by short positions, which will very logically move along in the relation with the price. The trader will profit off two factors: the market correction caused by the fluctuation described above and from the overall uptrend. Again, it is very clear that this is an advanced strategy that has to be properly implemented, otherwise it is really simple to get confused and overwhelmed by its complexity. In currency trading you go long when you expect the value to increase overtime, as it happens during bullish markets.
Likewise, going short is a term that ultimately means selling. You can think of it as shortening your assets. Going short is vital to the complete trading process as it is through those shorts that you collect you profit. Now, to the bears. As the bulls drive the bullish market, the bears drive the bearish.
There are many ways to define the bearish market exactly, but the simplest way is to picture as a complete opposite of bullish. Basically, the bearish market can be characterized by an overall downward movement, with the majority of traders selling rather than buying. We cannot really translate bearish market into apples, because apples are perishable.
With that said, it is also important to mention that bearish markets can also be used to achieve significant profit. This is because of the fact that during a downwards trend the currency value will eventually reach its extreme low, which will be the perfect time to buy it just before it starts raising in value again. It is a known fact within the trader community that a lot of well-known highly profitable traders made a fortune off the bearish markets.
Those profits happened prior to or during the major currency crashes, like that one of the United States dollar back in Although, the dollar never peaked as high as it did just before the fall, we are well aware that it proceeded to achieve visible heights afterwards. This is a nearly three decade old story which can be directly applied to the current situation at the market and used towards the advantage of the traders.
Every participant of the currency exchange market is subconsciously driven by the factors such as hope, greed and fear. Those very human, but yet tricky to deal with emotions can play a crucial role in the decision making process and as a result affect the overall success rate. Moving towards bearish strategies is especially difficult for the traders who got comfortable going long and have very strong feelings towards a specific asset or a position.
To successfully achieve profitable trading on bearish market, the trader has to start by getting a full control over their emotions and learn to see the chart as nothing more than it actually is - a graph with numbers. This normally requires a decent amount of time spent analyzing the market and trading in all sorts of situations. Additionally, a trader has to remember that both bullish and bearish market can be equally profitable and therefore there is no reason to get all stressed when the price has taken the undesirable course.
Apart from purely psychological aspects, trading is trading and all you need to achieve positive results is remain focused and follow a set of pre-established guidelines. First of all, you will need to make sure that the current market is in fact a bear market. There is a variety of downward movements on Forex and they do not usually indicate a general condition.
Some of the movements heading down include:. Retracement also known as a market pullback is a temporary drop in the price value caused by the fluctuation factor. Normally, the retarcements do not have any significant meaning to the overall picture, however in some cases the specific characteristics of several retracement can point towards and upcoming downtrend. This is where the technical indicators come in handy and assist traders with evaluating whether the given retracement is a minor hiccup or a beginning of something major.
Reversals are slightly more prolonged compared to retracements and signal for a radical change in both uptrend and downtrend. This means the reversal is a sign that the previously upward movement is going to start moving down and vice versa. There are a number of ways to indicate the upcoming reversal, most common ones are technical indicators or specific candlestick chart patterns. The market corrections also referred to as rollbacks are declines and rises in the price value in the scenarios when a currency in question has been overbought or oversold respectively.
The name correction comes from the concept that the overall changes eventually lead to the actual, or true, value of the certain currency, especially if it has been overspeculated for whatever reason. To confirm that the market has turned bearish you can use the line tool in your Metatrader 4 and connect all the high points of the price movement graph with a straight line, then do the same to all the low points. In the bear market both highs and lows will continually decrease creating lower highs and lower lows.
Bearish markets tend to be more short-lasting compared to bullish markets, but also more volatile, which means it is going to be harder to determine how long it is going to last and when exactly will it reverse. The volatility, in other words a tendency to change unpredictably and rapidly, is caused by a concept known as the market sentiment. Since, as we know, the market is driven by the traders, the way they process a certain situation is going to have an effect on the market.
That is why it is crucial to combine sentiment analysis of the market with a more solid technical one, to have a more comprehensive view of the events. The most common strategy applied to bearish markets is short-selling. Meaning that in order to short-sell a currency you will first need to borrow it from someone, typically your broker, and immediately selling it at the current price. You then use the profit of this sale to buy the same amount back after the price has gone lower, return the borrowed assets to your broker and take the difference in the price value as your final profit.
The key factor here is that you should only implement this strategy when you know for a fact that the market will continue moving downwards for a decent period of time. Because otherwise, if you end up facing an uptrend, there is a potential for large losses due to the escalated price of the borrowed asset.
Trading safe-haven or hard currencies. Some currencies tend to carry more stable values than others due to their economic background or overall influence on other currencies. Moreover, on Forex the assets are traded in pairs, which means that as one portion of the pair goes down in value the other one automatically rises. By including one or more of those in their chosen currency pairs, traders create sort of an emergency shelter for when the certain brownish substance hits the ceiling fan for the minor currencies.
Stepping aside and avoiding trading can also be considered a bear market appropriate strategy, although, needless to say it will most probably not result in visible profits. On the other hand, however, it is capable of helping traders prevent potential setbacks. The idea behind this is that many buy-and-hold traders panic during the bear conditions and randomly decide to sell before the price goes much lower.
But we know that the market cannot go down forever and the price will eventually stabilize and start going in the opposite direction, therefore prematurely dropping your holdings can be a very harmful step to make. Even Warren Buffet, the ultimate purchase-and-hold trader, believes that we can make more money while waiting patiently, rather than actively trading.
But at the end of the day, the question of personal activity at the market is very personal and every trader needs to decide when to enter the trades and when to keep away for themselves. It is time we get a little deeper into analysing the market in order to understand it better and choose the most profitable way to deal with every possible scenario. Analysing the market is the crucial part of a successful trading experience.
The analysis can tell the tarder a number of things, including: what are the current market conditions, how long a certain trend going to last, what is causing the certain changes and events, what are the possible outcomes of each particular situation, what trend is most likely to follow the ongoing one and so on and so forth. In fact, for some trades a certain analysis type can serve as a foundation of the entire trading journey, while for others it will hardly even matter.
That is why it is very important to start with things like identifying your personal trading style, choosing one or a few of preferable trading strategies and adapting appropriate risk management techniques. As all of the above have been established, the trader can move on to analysing the market and create a plan for the upcoming trades based on the results of their analysis.
There are three major categories of market analysis: the technical analysis, fundamental analysis and the least common, but yet very important sentiment analysis. Technical analysis is a purely mathematical approach of looking at the market data. Technical analysts take the current data and compare it to the data gathered from similar situations that took place at the market in the past.
The majority of traders tend to base their decisions on technical analysis due two one of the main characteristics of the currency market - repetition. Yes, it is a well-known fact that the Forex market has a tendency to run in circles and patterns, and that is why it is entirely logical to assume that if a similar scenario occurred in the past it has a good chance of coming to a similar or even identical outcome again.
Basically, this strongly relies on the fact that the same event can affect different currencies in a different way and there is no one single way to approach it. Additionally, once again, the traders define the market, which means that if the majority of participants will come to a similar conclusion about one particular event, the market will go in the direction they dictatem disregarding of how logical was the decision in question.
It is also worth mentioning that the fundamental analysis is more suitable for experienced traders and financial industry professionals since it requires depp knowledge of very complex matters such as international politics. Possibly the best way to integrate fundamental analysis in your trading is to source the signals from a constantly updating fundamental report, usually provided by the broker.
Last but not least, the sentiment analysis is a way to predict the upcoming changes at the market by evaluating how the majority of traders feels about the market at the given moment. Based on the overall pessimism or optimism, the certain asset can receive different levels of attention and therefore raise or fall in value. Although it is impossible to mindread how the fellow traders feel, there are some indicators that exist to provide sentiment data.
For example, the IG Client Sentiment indicator measures the sentiment direction by comparing the amount of long trades to a number of short trades at the current market. New traders usually start with technical analysis alone and sometimes do not choose to incorporate other types as they go on. Other traders use a combination of two or all three analytical approaches to have a fuller, more insightful picture of the market.
Whichever the case, avoiding using the analysis data in your trades altogether is simply not an option. Mostly because trading without a clear vision of what you are doing is gambling, and the gambling approach to Forex trading does not get you very far. To sum up, we will move on to discussing the main tool Forex traders use to monitor the bearishness and bullishness of the market - Forex trading chart analysis.
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Simply put, a bear market is one in which prices are heading down and a bull market is used to describe conditions in which prices are rising. Bull Bear. Professional, institutional-grade, high-quality, accurate, reliable, trustworthy, actionable real-time premium trading signals and analysis for day-traders. Typically, bull and bear markets are used to denote a specific asset class such as stocks, bonds, real estate or even the economy.