Understanding Stock Market Concepts – Bullish Markets
Trading, just like any industry has its own share of jargon and phrases which you should be able to understand in order to be able to trade more effectively. If you were to read a business newspaper, for example, chances are you wouldn’t understand many of the idioms and phrases used there unless you were actively using the terminology indicated. One of the concepts which are shared within trading and used a lot in the stock market is the term “bull market”.
Contrary to what the literal understanding of the phrase would mean, a bull market is in fact, not a market where bulls are traded (Maybe there’s Bull Market in Pamplona?). Instead, it is more of a description of how a bull reacts. If you have ever watched the television and seen a bullfight, you will know that bulls generally charge at their opponents and toss them up with a movement of their horns. This is largely where the term “bull market” comes from.
In a bullish market, the expectation is that there will be an upward trend in the price of a particular stock or share. This rise can happen for a variety of reasons. In general, you are talking about the whole stock market when you talk about a bullish market but that does not mean it is necessarily caused by just an overall factor. Let’s look at two examples of how one factor can affect the market and turn it bullish and then let’s take another example that creates a domino effect to turn the market bullish.
The first example deals with government laws. Let’s say, the U.S government decides to pass a bill lowering corporate taxes for all companies that have stocks in the stock market and let’s say there is a huge increase in government funding to support businesses. This would be beneficial to all companies in the stock market in general which would result in a rise in stock prices on the average and therefore better times for the market.
The second example is a little different. Let’s say Company A trades stocks on the stock market and that they serve a variety of industries. Now let’s say that the company decides to provide Open Source solutions to its many customers at a fraction of the price because they want to increase their customer base. As it turns out, they provide technology to a huge number of companies that are in the stock market. Because of their change, a number of other technology companies follow and they start to provide better services as well. The other companies within the market are then able to provide better and more efficient services to their consumers and the value of their stocks rise. In this case, the market would be in a bullish state because their prices increase.
As you can see, a number of things can cause a bullish market and they are not limited to the examples above. Whether you buy or sell depends on a strategy. For example, you can buy and wait for prices to reach their peak and then sell our stocks or you can choose to not buy and then sell your stocks at their peak price. When does the Peak price occur? Good Question : ) More answers in later articles.
This article was written by WeAreSEOguru
