Bulls think the markets will go up. Bears think the market will go down.
“Bearish” and “bullish” can describe an individual opinion or a general market trend.
A market in a long-term uptrend is called a bull market. A market in a long-term downtrend, with continuously falling prices, is called a bear market.
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.
Bulls think the market will go up
If a trader says, “I’m bullish on gold,” it means that he thinks the price of gold is going to go up.
That trader may have a reason for his bullishness. Perhaps there is uncertainty in the stock market, and he thinks investors will move their money into gold as a “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 “dead cat bounce.”
Bears think the market will go down
Similarly, a trader or analyst might be bearish on stocks. That is the trader’s personal opinion of where the market is likely to go.
If a majority of traders have a bearish or bullish opinion, then their collective judgement can cause a market to go into a long-term up or down trend.
Bull markets & bear markets
If a financial news show reports that most analysts in a survey think we are headed for a "bear market" in stocks, it means that those analysts think that stocks will begin an extended downtrend, with prices falling consistently for a while.
In recent years, the US stock market has been a bull market: the S&P 500 index increased nearly 300%, from a low of 666 in March 2009 to highs over 2600 in early 2018. This bull market coincides with the second-longest economic expansion in US history.
However, it’s important to distinguish between the two. It’s possible to have a bull market without economic expansion and a bear market without a recession. Other long-term bull markets include the periods of 1925-1929 and 1993-1997.
The recovery that began in 2009 was preceded by 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 bull markets can be followed by bear markets, and vice-versa. The tech 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.
Traders can be bullish on some markets and bearish on others
As a trader you might be bullish on crude oil, bearish on the euro currency, bullish on gold, and bearish on Japan’s Nikkei 225 stock index.
Because Nadex lets you trade multiple markets from one account, you can trade each of those opinions individually using binary options and spreads.
You can also be bullish long-term but bearish in the short-term. For example, you may have a long-term investment in index funds because you believe the stock market will go up over the next decade. However, you may also think the market is going to take a dip, a short-term correction, over the next few weeks or months.
You can use Nadex binary options and spreads to effectively “hedge” against that short-term dip in your stock index portfolio. By selling binaries or spreads, you can try to profit on the price drops. Those profits could potentially offset the losses in your long-term investments.