A bull in finance purchases securities aiming to sell at a higher price and is the opposite of a bear in the ongoing bulls vs. bear battle. So, what is bull?
Knowing the difference between a bull and a bear helps deploy appropriate strategies. We will outline what a bull in finance is by examining the characteristics and showing examples, helping you understand the bull meaning in stock market conditions.
A Bull in Finance Characteristics
You may have heard the term bull run in stocks, but how can you identify one? A bull in trading means rising prices and equally applies to bull Forex conditions.
Look out for the below to determine what is bull in trading and bull in finance:
- A minimum increase of 20% from the most recent lows spanning several months
- Daily trading volume during up days is higher than during down days
- Bullish chart patterns on a D1 chart, for example, an ascending triangle, a flag formation, a rounding bottom, a cup-with-handle, or a falling wedge
- Improving economic indicators that suggest a strengthening economy
- High investor confidence and improving investor optimism with expectations of higher prices moving forward
- Many investors turn bullish during bear markets, believing the sell-off is over, thinking they found value, leaving them vulnerable to a bull trap in trading, which we will explain below
Bullish Behaviors Explained
There is no difference between bulls in stock markets and bulls in Forex, but how do bulls behave, and what do they do?
Here are bullish behaviors, tips on finding bullish trading opportunities, and red flags:
- Bulls will scan for chart patterns, like the ones noted above, or bullish reversal patterns, for example, an inverse head-and-shoulders or double-and-triple bottom formation
- Four of the most used technical indicators bulls use are moving averages, where prices above the moving average are bullish, the MACD for a positive histogram and the MACD signal line above the trend line, and the RSI, where a reading below 30 hints at extreme oversold conditions, plus volume indicators, confirming higher volume on up days
- Bulls often ignore warning signs, dismiss bearish signals, and display stubborn optimism even during bear markets, as they follow the herd mentality and follow others rather than let emotionless data drive the decision-making process
- Making money during a bull market is notably easier than during a bear market, and most stock markets have long-term bullish trends
- Bull markets usually last longer than bear markets, but the latter is more powerful and can result in more portfolio damage than bull markets can fix
Examples of a Bull Market
Here are the three most notable bull markets over the past 25 years:
- The Dotcom Bubble between 1995 and 2000 saw technology stocks surge to all-time highs despite an abundance of reds flags, resulting in a massive 80% market crash
- The Housing Bubble followed a few years later, where bulls once again pushed stock markets to fresh all-time highs, ignoring the warning signs, and the global financial crisis of 2008 followed, where assets crashed by 50%
- The Everything Bubble, where central banks created an artificial bull market following the global financial crisis, pushed markets to new all-time highs, which ended in 2022 with the arrival of a bear market
A Bull Trap in Trading
A bull trap exists in a bear market when assets advance, usually amid a short-covering rally or bottom fishing with thin volume. Prices quickly rise to a lower high before bearish traders force price action to fresh bear market lows with higher volume.
Can Bulls Limit Trading Risks?
Bullish traders may use stop-loss orders, which close a losing trade at a set level, managing downside risk or hedge portfolios with put orders. Bullish investors often use dollar-cost-averaging strategies with a lengthy time horizon and cross-asset diversification.
The Bull vs. Bear Difference
A bear is the opposite of a bull, believing prices will depreciate while economic indicators weaken, sentiment turns negative and selling volume increases. Bear markets can take years to develop slowly and usually have a shorter duration but more violent trading conditions.
A bull in finance is optimistic about future prices but often ignores warning signs and can fall victim to bull traps. Long-term buy-and-hold investors are generally bulls, while traders capture price action moves in either direction.
Does bull mean buy or sell?
Bull means buy as the assumption is higher prices moving forward.
Why do we use bear and bull in the stock market?
Bears are incredible hunters and hibernate, while bulls move in herds, describing market conditions and their frequency in financial markets.
Who is the more powerful bull or bear?
Bears are more powerful, as they strike less often but result in more violent market conditions.