As a keen trader or even just a light observer of the financial markets you’ve probably many times come across the expressions bullish market or bearish, and markets are often described as having a bullish or bearish sentiment. But what exactly does it mean when commentators proclaim a market to be bullish, or warn that the market tendency is bearish? Understanding bullish vs bearish markets is critical for a trader to navigate the different market conditions and realize their varied effect.
If you want to understand even more important terms and definitions, check out our complete glossary of trading terminology to become a more informed (and better) trader.
Bullish vs Bearish Explained
Professionals in the field of finance often refer to the markets as being bullish or bearish based on the general price movements being positive or negative. And when analysts throw around the term “bear market” or “bull market” they are describing whether a market is optimistic (rising or likely to rise) or pessimistic (dropping or likely to drop). The main difference between bullish and bearish markets is whether confidence is high and prices are rising or if it is low and prices are dropping.
More specifically, the terms bullish and bearish describe the actual state of the market – if it is gaining value, or in an “uptrend,” or losing value in a “downtrend.” These trends are usually affected by and reflect the emotions of the traders and whether they are buying or selling. Markets and asset prices will usually rise amid positive news and fall when there is bad publicity. Sometimes certain groups may attempt to influence the prices, but in a huge market such as forex this isn’t as feasible.