The Bulls, the Bears and the Farm

When you talk about the stock market or even mention Wall Street, the terms 'bulls' and 'bears' will definitely come to mind. Below are some of the terms that Unifunds think an investor should know regarding stock market trading.

A bull market is when everything in the economy is going well, such as people finding jobs and employment, gross domestic product (GDP) is growing and stocks are rising.

The Bulls

Selecting stocks during a bull market is easier because everything is going up and increasing. Bull markets cannot last forever though, and sometimes they can lead to dangerous situations if stocks become overvalued.

If a person is optimistic and believes that the stocks will go up, the investor is called a ‘bull’ with a bullish outlook.

The Bears

A bear market is when the economy is bad with recession looming and stock prices falling. Bear markets make it tough for investors to pick profitable stocks.

One solution is to make money when stocks are falling using a technique called short selling. Another strategy is to wait until you feel that the bear market is nearing its end, and only start to buy in anticipation of a bull market.

If a person is pessimistic and believes that stocks are going to drop, the person is called a 'bear' and said to have a bearish outlook.

Other Animals on the Farm

Aside from the Bulls and Bears, there are other, though not commonly used, terms, such as Chickens and Pigs.

Chickens are afraid to make losses. Their fear overrides their need to make profits and so they turn to money-market securities or get out of the markets entirely. While it's true that you should never invest in something over which you think you will make losses, you are also guaranteed never to see any returns if you avoid the market entirely and never attempt to take any risk.

Pigs are high-risk investors looking for the one big score in a short period of time. They buy based on hot tips and invest in companies without doing proper background research. They can get impatient and emotional about their investments, and are drawn to high-risk securities without putting in the time or money to learn about these investments.

There are several different investment styles and strategies out there. Even though the bulls and bears are constantly at odds, they can both make money with the changing cycles in the market.