Bullish: A market mentality in which the investor believes prices will rise
Investors who adopt a bull approach purchase securities under the assumption that they can sell them later at a higher price. Bulls are optimistic investors who are attempting to profit from the upward movement of stocks.
NOTE: When a bullish investor enters a trade, they are considered to be ‘going long’
How Bull Markets Begin
If you understand anything about how prices move, then you’ll know that a bull market is simply the self-fulfilling prophecy that occurs when people believe prices will rise due to some outside catalyst. The bullish traders will buy stocks on the assumption that the prices will rise, and prices raising is a direct result of the bullish investors’ buying power.
This belief is then reinforced as the participants in the market continue to push the prices higher despite any negative information, which then validates their belief that the price should be rising.
Bull Traps
Bull investors must be aware of what is commonly known as a bull trap. A bull trap exists when an investor believes a sudden increase in the value of a particular security is the beginning of a trend resulting in the investor going long. This can lead to a buying frenzy (FOMO!) where, as more investors purchase the security, the price continues to raise. Once those interested in purchasing the security have completed the trades, demand may drop and lead to plummeting prices for the security.
As the price declines, bull investors must choose whether to hold or sell the security. If investors begin to sell, the price may experience further decline. This may prompt a new round of investors to begin selling their holdings and driving the price down even further. In cases where a bull trap did exist, the price of the associated stock often does not recover.
As a bullish trader, you are required to understand exactly how to navigate the ‘long’ side of the trade. This can be pretty difficult as demonstrated by the staggering statistic that over 90% of traders fail. One extremely important step to take as a trader is to learn and understand why these 90% of traders failed, and then avoid those mistakes. We break down these mistakes in this free trading workshop, so I suggest you sign up now and learn!
