Bullish

What is Bullish?

Bullish is a broadly used term to describe an investor’s belief that a specific security, sector, the stock market as a whole, or the nation’s economy is expected to grow.

Investors call someone “bullish” if that person believes that stocks, or any other security for that matter, will go up,. They call a someone “bearish” if that person believes that stocks will go down. Market sentiment informs investors’ behavior, and it is ultimately important to understand how optimistic or pessimistic their outlook is.

‘Bullish Trend’ is an upward trend in the prices of an industry’s stocks or the overall rise in broad market indices, characterized by high investor confidence.

What Does Bullish Mean?

Believing that the market is likely to improve, a bull investor opens a long-position to realize a profit from the difference between the price he is buying the stock and the higher price he is expecting to sell it. Bullish investors create the market sentiment by focusing on identifying investment opportunities that are likely to increase in value, thus realizing a higher return.

Usually, a bullish market is characterized by rallies during which stock prices may rise to historical highs, and even start-up companies may see their stocks grow. Technically a bull market is a rise in the value of the market of at least 20%.

Where the Term Bullish Came From

The term bull originally referred to speculative purchases rather than general optimism about prices and trend lines. When the term first came into use it referred to when someone grabbed a stock hoping it would jump up. Later, as years went on, the term evolved to refer to the individual making that investment, and eventually to the general belief that prices will rise.

Etymologists disagree on the exact origin of this term, however, it most likely has its origins as a foil to the term bear. While other theories circulate, this is the most generally accepted source of the phrase bull market. Perhaps the most widely reported alternative source for the term comes from how the bull as an animal attacks, by sweeping its horns upward in the same direction that optimist investors expect the market to go.

By contrast, under this theory, a bear market refers to how a bear will swipe downward with its paw. However, while literature contains numerous positive references to bulls throughout Western canon, etymologists have found little sound evidence for this specific theory in any historical record.

Famous Bullish Traders

There are many famous bullish traders who have earned large profits from speculating on markets rising:

  • Jim Rogers made his fortune with the Quantum Fund, which he co-founded with a famous bearish trader – George Soros. Rogers contributed to the growth of the fund by being bullish on commodities throughout the 1980s and 1990s
  • David Tepper bought large quantities of undervalued American bank stocks in the fallout of the 2008 financial crisis, and cashed in when their price increased after a government bank bailout
  • Ed Seykota is a famous trend trader who turned $5000 into $15 million over 12 years by following both bullish and bearish trends
  • Richard Dennis is another trend trader, who turned $1600 into $200 million in just ten years. He did so by being bullish during uptrends and following the trend until its completion

What is a Bull Market?

A bull market is a financial market (whether it’s currencies, metals or commodities) where prices are rising or are expected to rise. General optimism, investor confidence and expectations of continuous strong uptrends characterize a bull market. These uptrends usually last for weeks, months, or even years, but can be as short as a few days, depending on the surrounding circumstances. Predicting changing trends is sometimes difficult as trader psychology and speculator behavior can play a role.

Markets become bullish generally when the economy is doing well or coming out of a previous slump. For instance, individual currencies may rise in line with a strong GDP output, or drop when unemployment figures or interest rates aren’t favorable. Supply and demand forces still govern in a bull market, so weak supply but strong demand (as in the case of commodities such as oil or natural gas) will see prices rise as more investors want to purchase the asset than are willing to sell it.

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