It generally relates to the trade of bear skins during the 18th century. During this era fur traders would, on occasion, sell the skin of a bear which they had not caught yet.
They did this as an early form of short selling, trading in a commodity they did not own in the hopes that the market price for that commodity would dip. When the time came to deliver on the bearskin the trader would, theoretically, go out and buy one for less than the original sale price and make a profit off the transaction.
While this worked often enough to keep the practice going, it usually failed. This led to popular expressions of the time. But the expressions took on a more specific meaning among investors and stock traders, who understood the practice of speculating on an anticipated downturn. Eventually the term bear expanded. Instead of referring specifically to short sale traders investors began referring to anyone who expected price dips as bearish, and declining prices as a bear market.
The first thing you should have in order when it comes to investing is your ultimate financial goals. For most Americans, this principally includes retirement, along with vacations, buying a home and more. By defining your goals, you can make investment decisions based on them. For instance, someone nearing retirement may want to steer clear of individual stocks since they can be quite volatile.
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If you're "going long" in a stock , it means you're buying it. If you're already long , then you bought the stock and now own it. In trading, you buy or go long on something if you believe its value will increase. This way, you can sell it for a higher value than you paid for it and reap a profit.
Being long, or buying, is a bullish action for a trader to take. Put simply, being a bull or having a bullish attitude stems from a belief that an asset will rise in value. To say "he's bullish on gold ," for example, means that he believes the price of gold will rise. Being a bull can represent an opinion or action. Someone who's bullish may go long on the assets they're bullish on. Alternately, they may just have an opinion that the price will rise, but have decided against making any trades based on that opinion.
Bullish stances can be extremely specific opinions about a single stock, or they can be broad opinions about the overall market. The term "bull" or "bullish" comes from the bull, who strikes upward with his horns, thus pushing prices higher.
A bull market is when an investment's price is rising—called an uptrend —typically over a sustained period, such as months or years. Bullish, bull, and long are used interchangeably. For example, instead of saying "I am long on that stock," a trader may say, "I am bullish on that stock. Most people think of trading as buying at a lower price and selling at a higher price, but that's only part of what traders do. Traders can also sell at a high price and buy back at a lower price.
Being short, or shorting , is when you sell first in the hopes of being able to buy the asset back at a lower price later. In other words, the financial markets allow traders to buy then sell, or sell then buy. This is essentially borrowing the asset, selling it, then buying it back cheaper for a profit. If you've done this, then you're "short" the asset.
You'll also hear the term "short-selling. Even during a bull market, it's unlikely that stock prices will only ascend. Rather, there are likely to be shorter periods of time in which small dips occur as well, even as the general trend continues upward. Some investors watch for retracements within a bull market and move to buy during these periods. The thinking behind this strategy is that, presuming that the bull market continues, the price of the security in question will quickly move back up, retroactively providing the investor with a discounted purchase price.
Perhaps the most aggressive way of attempting to capitalize on a bull market is the process known as full swing trading. Investors utilizing this strategy will take very active roles, using short-selling and other techniques to attempt to squeeze out maximum gains as shifts occur within the context of a larger bull market. The most prolific bull market in modern American history started at the end of the stagflation era in and concluded during the dotcom bust in The NASDAQ, a tech-heavy exchange, increased its value five-fold between and , rising from 1, to over 5, A protracted bear market followed the bull market.
From to , the market struggled to establish footing and delivered average annual returns of However, saw the start of a more than ten-year bull market run. Analysts believe that the last bull market started on March 9, , and was mainly led by an upswing in technology stocks. The actual origin of the term "bull" is subject to debate.
The terms "bear" for down markets and "bull" for up markets are thought by some to derive from the way in which each animal attacks its opponents. That is, a bull will thrust its horns up into the air, while a bear will swipe down. These actions were then related metaphorically to the movement of a market.
If the trend was up, it was considered a bull market. If the trend was down, it was a bear market. Others point to Shakespeare's plays, which make reference to battles involving bulls and bears. In Macbeth , the ill-fated titular character says his enemies have tethered him to a stake but "bear-like, I must fight the course. Several other explanations also exist. Since the dramatic market sell-off during the financial crisis, the stock market has shown a resilient bull market, rising significantly, and reaching new all-time highs more than ten years after that market crash despite some sharp pullbacks along the way.
Bull markets often exist side-by-side a strong, robust, and growing economy. Stock prices are informed by future expectations of profits and the ability of firms to generate cash flows. A strong production economy, high employment, and rising GDP all suggest profits will continue to grow, and this is reflected in rising stock prices.
Low interest rates and low corporate tax rates also are positive for corporate profitability. When the economy hits a rough patch, for instance in the face of recession or spike in unemployment, it becomes difficult to sustain rising stock prices. Moreover, recessions are often accompanied by a negative turn in investor and consumer sentiment, where market psychology becomes more concerned with fear or reducing risk than greed or risk-taking.
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