What’s the difference between a bull and a bear market?

The movements of currencies in the Forex often follow trends. These trends come in several different forms and among the ones easiest to follow are those found in bull and bear markets.

A bull market is in session when the values of securities, be it currencies, stocks, or bonds, start surging upwards for a considerably long period of time. This is generally considered to be a great time for the economy which motivates investors to make riskier trades based on their belief that the market will continue on improving. When this happens in the Forex, you will usually hear those traders be called as bullish which refers to their optimism that the exchange rate of a currency will keep increasing in the near future.

In contrast, a bear market happens when the values of investments experience a sharp fall that doesn’t end until they bottom out after an extended period of time. Knowing when they will stop declining though is easier said than done which brings a lot of uncertainty into the market. This causes traders to sell what investments they have fearing they it may become worthless if they hold on to it for too long a time. Thankfully, Forex traders are mostly spared from having to resort to this behavior.

While knowing when a bull or bear market is present is helpful, the presence of either conditions have little impact on the Forex. While stockbrokers may start to feel panicky in bearish conditions, Forex traders can still trade as they normally would except that they should start selling currency pairs instead of buying them. Since the Forex is one of the most liquid markets in the world, you can feel safe that your account won’t get wiped out. Instead, you are free to open any position and make a profit from it during almost anytime no matter what trend is happening.