When we start off with binary options trading we come across trading terms like Bearish vs Bullish.
The market trends are defined by these terms, and it is very important to have a thorough understanding in order to get a hold of the dual nature of binary options trading. The term bearish is linked to falling stock prices. Similarly, the term bullish stands for rising stock prices. Thus, it is clear that bearish and bullish trends are associated with rising and falling of asset prices.
Concept of Bullish trends
The investors who interpret that the stock prices will rise with time, especially those who are planning to invest in call options will always look for bullish trends with higher highs and higher lows. A bullish market is always in demand as it reflects that the investors are confident about the market. In bullish market conditions the shares traded is also on the higher side. In stocks, the bullish trend is backed by strong corporate earnings, similarly in currency market the higher interest rates create a positive outlook of the asset and thereby increase the demand in the market. In commodities markets, comprising of oil and gold, the bullish trend is created only when the supply of these commodities is less, the market stands bullish.
The price movements create a map for the investor based on their investments in different markets to analyze the increment and profits earned from a particular market.
Concept of Bearish trends Bearish vs Bullish
The investors who interpret that the stock prices will fall in the course of time will always plant their money input options with bearish trend. In bearish trend, one can expect lower highs and lower lows on the price movement. The corporate earnings show lower profit margins, thereby creating bearish trends in the market domain. The currency market faces lower interest rates, which prove to be negative for the asset and creates more sellers in the market. In bearish market conditions, the investors show very little confidence and prices tends to remain same or go down further, the indices also show a steep fall and the volumes remain fixed in one place.
The commodity market, need to portray the decrease in demand for commodities in order to reflect a bearish trend in the market.
Balancing the trends
The investors are of the opinion that if they recognize correctly the different market conditions they can earn good profits. The basic rule followed is to buy the share at low price and sell it at a high price. This method can fetch good returns. Generally speaking, one needs to invest in stocks during bearish market trends when share prices are lower and sell the stock in the bullish market when the stocks are experiencing high prices. But, this doesn’t always work, as it is difficult to correctly interpret market mood. There are many investors who get emotional with their asset and in fear of losing money sell it in bearish market and buy in bullish market when assets are priced high to gain larger returns.
The best possible way to counteract market conditions will be to find a balance between Bearish vs Bullish trends by aligning the dominant forces present in the market and having a complete understanding of those forces.
Bullish vs Bearish Conclusion
Bringing all these factors together, binary options traders are far more capable to follow the market trends by recognizing correctly the right trends. Once a trader is able to align his trading strategy according to a bullish trend or a bearish trend, trading the binary options is much easier.