Difference Between Bullish and Bearish

Difference Between Bullish and Bearish

The stock market is unpredictable. A company can do so well in one day and lose so much the following day. This is aside from the fact that political and environmental events also have an impact on market leanings, which makes them even harder to envisage.

Fortunately, there are ways that you can make educated guesses to decide which assets to invest to and which ones to let go. If you’re a stock market trader, you’d know that knowing the market sentiment will help make a better decision. The market sentiment is the dominant attitude of investing parties towards the market’s price development, and it can either be bullish or bearish.

However, what exactly is the difference between bearish and bullish? How will knowing the difference between bullish and bearish help in making financial decisions? What is the difference between bullish and bearish in terms of their definition and implications? This article will answer these questions to provide more guidance and increase your knowledge in these market sentiments. We will start by defining each term, and then, laying out their variances in a tabular representation.

Definition of Bullish

Bullish is, just by looking at the word, suggestive of a bull-like demeanor. When one is described by this word, it means that the individual is providing his/her judgment confidently. It can also mean that the person approaches like that of a bull; it charges in an upward direction. This likeness also manifests in market sentiments.

In the financial world, the definition of bullish is the speculation of investors that the market prices will take an upward turn. In this case, investors who are “bullish” will purchase stocks in the hopes of increased unit prices eventually, which leads to a good return. This stock-market jargon, together with bearish, was adapted from the 18th century-imagery of the bull and the bear, which symbolize different behaviors.

Market partakers who maintain this sentimentality are referred to as permabulls. These individuals acquire shares, stocks, or bonds when they forestall an increase. However, experts like to go against the market sentiment, as they believe that its best to go against what most people veer towards. Statistically speaking, more investors take the bull approach, though.

Definition of Bearish

Bearish is, on the other hand, implicative of a bear-like behavior. It is often thought as the opposite of the former. The coining of the term is quite interesting, as it was realized earlier than bullish. History points the etymology of the world from the proverb, “to sell the bear’s skin before one has caught the bear,” which suggests selling the “item” before its price lowers.

It can also be likened to the bear’s direction of attack, which is downward, considering most of its opponents are smaller. The definition of bearish implies that the stock market is expected to have a downturn. In the event that it happens, the individual can buy the stock back at its decreased price, making the profit along the way.

Market partakers who are governed by this sentimentality are labelled as permabears. These individuals like to make a profit out of the market downturn. A bearish market is, more often than not, constituted by the stock prices increasing above normal.

Bullish vs Bearish Comparison Table

To provide a clearer picture of the distinction between these trader jargons, below is a table with main differences.

Basis of ComparisonBullishBearish
Preferred directionUpwardDownward
Principle Buy stock because the prices are expected to go upBuy stock because the prices are expected to go down
UtilizationTo label the market sentimentTo label the market sentiment
Term for partakersPermabullsPermabears

Conclusion of the Main Difference Between Bullish vs Bearish

Stock market trading is a promising endeavor. This is why many and many individuals dive into this field, as it can transform a small investment to a large amount in a short period of time. Contrary to establishing a business to make a profit on capital, it does require a long planning or elaborate permits or business knowledge.

However, it does require a working knowledge on the market trends and sentiments to facilitate good capital growth. If you’d like to dive right in as you perceive a positive market growth, then you must be a permabull, and you can partake in a bullish market.

However, if you dig the market anticipating the opposite, then you’re a permabear, and you can partake in a bearish market. Now that you know the difference, you can make a better decision if you’d like the former vs the latter. Either way, it is essential to further your understanding by studying the trends, so you can make the most out of your trading and build your skills as a trader.