Bearish and Bullish Definition

Traders have long used the terms “bearish” and “bullish” to describe two things: their own feelings about a market and what they feel is a general mood in the market as a whole. For example, a trader or investor might say, “I’m bearish about crude oil going into the summer.” She means that she thinks the price of crude oil is likely to go down in the early weeks of summer.

If a trader says, “I’m bullish on gold because of the volatility in stocks,” it means that he thinks the price of gold is going to go up, perhaps as a response to uncertainty in the stock market, a phenomenon sometimes called the “flight to safety.” Some people think of gold as a safe place to put your money because of its historical value. Trading is full of colorful metaphors like “flight to safety,” “catching a falling knife,” and even the slightly sad “dead cat bounce.” Traders can get rather poetic when the markets are quiet.

Bull and bear can also be used to describe markets, particularly long-term market trends. The US stock market during the recovery from 2009 to 2015 increased nearly 200%, with the S&P 500 going from a low of 666 in March 2009 to highs over 2100 (as of this writing). That was the definition of a long-term bull market. Other long-term bull markets include the periods of 1925-1929 and 1993-1997.

The recovery that began in 2009 followed a sharp bear market from 2007-2009, marked by the financial crisis brought on by the subprime mortgage crisis and the overleveraging of debt-based derivatives like credit default swaps. Sometimes long-term bull markets can be followed by bear markets, the way the boom of the 1990s ended with the bursting of the dot-com bubble of 2000-2001.

The bull market of the 1920s ended not just with a bear market, but a crash followed by the Great Depression. It’s important to remember that bull and bear markets don’t necessarily correlate to good and bad economic conditions overall. More Americans became millionaires during the Great Depression than in any other period. And while investors saw their portfolios more than double in value in some cases between 2009 and 2015, the economic recovery was mixed. The US had a record streak of job creation, but wage growth has stagnated since the 1960s and both the US median and minimum wage were actually lower in equivalent dollars than in 1973.

As you can see, the terms “bearish” and “bullish” can be used to describe many things. You might even be bullish on certain stocks but bearish on the stock market overall. If so, binary options might offer a way to trade or hedge against the drop in stock indexes, while you invest in those stocks you think will go up.

Because Nadex lets you trade multiple markets from one account, you can be bullish on stocks and trade the up side of the Dow or DAX and at the same time be bearish about the dollar and trade the EUR/USD or dollar-yen forex pairs. 

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