What are the Bulls and Bears in Forex?
Often traders characterise trends as bullish or bearish, although there isn’t much correlation between the two. The term bullish represents an upward trend, while bearish represents a downward trend. These jargons are often used in technical commentaries, phrases like bullish sentiment, bearish reversal, allows ease of communication between traders. The uptrend is called bullish because bulls attack upwards with their head while bears attack downwards with their claws. Hence, the reason why there is a bull on Wall Street is because they want the market to be bullish, i.e. going up.
What makes it bullish or bearish?
Markets are driven by sentiments of buyers and sellers. Prices are governed by the economic laws of supply and demand. If there is more buying than selling, demand is increased hence prices will increase, this is known as bullish. Whilst if there is more selling than buying, demand is decreased hence prices will drop, this is known as bearish. The bullish sentiment can come from various sources in Forex. For example, if a country increases its interest rates, it will increase the currency’s intrinsic fundamental value, which will give traders a bullish sentiment. On the opposite end, if technical indicators show that a currency is overbought and overvalued, the market will correct itself and the currency will consolidate back to an optimal price, this is a bearish sentiment to the market.