When trading digital options you are likely to hear or read the words bears and bulls quite often in reference to market conditions. As popular as these terms might be, there are some trader who still need to know exactly what these terms mean. If you happen to be one of them, now is the time to learn how these words will are applied to the markets.
History Of Bears and Bulls
Both terms are used within the stock exchange and are taken from the manner in which each animal attacks. A bear will swipe downward upon his opposition while a bull typically thrusts its horns in an upward motion. As each of these actions are comparable to the increase and decrease of prices along with how an investor arrives at each investment decision, the two terms were used to associate metaphorically to price movements within the markets.
Negativity is what dominates in a bear market. Usually, they commence whenever there is a tremendous decrease in asset prices then ultimately when issues improve, they would be unacknowledged simply because traders hold the frame of mind that they will recover at a later time. As an result, the economic system is weakened and unemployment numbers decrease. No one wants to make a purchase that they strongly feel will not be lucrative.
Traders in bull markets are almost always optimistic. As a consequence, the unemployment position is likely to remain at a lower level and the economic system is strong and robust. Consumers are willing to spend their money and in doing so help businesses to earn money. Things are going well. This results in a higher number of investments being made because investors feel strongly that these investments are going to pay dividends in the future.
The moving average encompassing the last 250 days for investors is referenced as the bull/bear line. When trading digital options, it suggests whether asset prices are going to increase or decrease. It also functions as guide for longer term investments because whenever the current asset price drops below the line, this suggests that the bearish market may soon turn bullish. Should the price move above the line, the market conditions could be the opposite.
The Charles Dow Concept
Charles Dow, a renowned editor at the Wall Street Journal, believed that the destiny of the market conditions (bearish or bullish) relies upon on the people. Even when there is going to be a trend reversal, traders should not base their judgments too strongly on what could possibly occur but rather concentrate on how they have the power to impact price actions. Anyone with the hope of making lots of money in the markets should therefore teach themselves to think positively.
Typically, bearish and bullish market conditions are measured in periods of years. Regardless of whether prices move up or down, the overall position generally stays the same for a period of time. However, this mainly applies to the long-term and for that reason digital options traders will need to take into consideration more short-term market conditions in order to profit from smaller time period contracts.