ARE YOU A BULL, BEAR, OR A PIG?

“Bulls make money, bears make money, but pigs get slaughtered.” Perhaps this is the most famous and most accurate statement that you will hear in trading and investment. Have you ever wondered what this means? This article will explore who the bulls, bears, and pigs are in the stock and Forex market and what the above quote suggests.

The stock market, of course, is not a place where you would generally expect bulls, bears, and other such animals. These are just business terminologies used to refer to players’ different attitudes and characteristics in trading in the market. Let us look at them one by one.

Characteristics of Bulls

The “bull” type of traders are the ones who keep an optimistic outlook in general. They expect the market to perform well and prices to move upwards. So, they buy shares or currencies, foreseeing a rise in their prices to sell them at a later point in time, thus realising the profit margin.

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However, there is a debit side to this. Some traders are a bit “overly bullish” in their nature. They may end up getting burnt at the end of the day due to their overconfidence or overly optimistic outlook. This is because the market is not favourable to all players at all times. There are times when things don’t go in your favour. So, if you keep a bullish outlook at all times, then you’ll have to pay the price at some point.

Here are three primary causes for the problems that overly bullish players run into:

• They tend to ignore the warning signs against the scripts or currencies that they hold. This may include Federal Reserve data, economic data, significant financial headline and more.
• They are reluctant to sell after they have made a decent profit. They keep their stock, hoping that the price would go even further up, which may not always be the case.
•  They tend to catch falling knives. When the price of a particular stock or currency falls, bulls immediately start buying them, thinking that it will lower their cost base. However, this is like catching a falling knife before it hits the ground. So, if you try catching it while it’s falling, it’ll most likely just slice your hand. A falling price may fall further down, making the trade costly. 

In short, being overly optimistic can tank opportunities. Bulls must do a reality check regularly to ensure their stocks and currencies make a healthy profit. 

When bulls dominate the market, there is more aggression and positivity in the market, and one can witness the market steadily going upwards.

Characteristics of Bears

The “bear” type of traders, on the other hand, are those who keep a pessimistic outlook in general. They don’t expect a good run in the market and that stocks and currencies will go down. So, they sell shares to make a profit at a later point in time by buying them when they hit bottom.

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And there is a debit side here too. Sometimes, a stock or currency performance in the first quarter may not be at par with what had been forecasted. The bears will then hold a negative view of that stock or currency and start selling it short. However, to their surprise, the same stock or currency may come roaring up in the next quarter or subsequent quarters, proving their analysis wrong and causing them significant loss. 

Two unique characteristics of bears that cause them such slips are as follows: 

• They tend to focus more on the avoidance of risks and loss of money
•  They tend to exaggerate every wrong turn in the market and view that as “sky falling down.” 

When bears dominate the market, one can witness mass selling off of stocks and currencies and a resultant decline in the market.

Characteristics of Pigs

“Pigs” are traders who can never be satiated. No matter how much they gain in an investment, they’re not satisfied; it’s not enough for them – and they greedily go over more gains, often ending up in huge loss.

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Whether the market goes up or down, “pigs” invariably end up with a loss. This is because of three distinct reasons:

• They tend to trade with greed as the primary motivating factor
• They tend to ignore logic and writings on the wall. They carry unrealistic expectations about the performance of their stocks and currencies in the market
• They tend to disrespect the basic rules of trading

As a result, they get slaughtered! Entirely natural, eh?

Now that you’re familiar with the stock and Forex market terminology, you may analyse your trading style and identify which category you belong to. 

If you’re not yet sure which style you fit into, join frequent training sessions with Axiory Intelligence that help newbies sharpen their trading skills.