Bull Market and Bear Market: How to Make the Best Choice

In forex trading, the main deciding factor in choosing the direction of a trade is the direction of the trend.

The peculiarity of trading on the foreign exchange exchange is that it is difficult to identify the existing trend; the influence of bulls or bears here is not as pronounced as on the stock exchange.

But still, if you use both fundamental and technical analysis to study the situation, you can identify what sentiments are inherent in the trend at the moment.

Sometimes newcomers to the stock exchange ask: “When is it better to trade, on an uptrend or a downtrend?” It is best to start your trading by opening buy transactions.

This means when there is an upward trend and the exchange rate of the currency pair predominantly rises.

But if you have been familiar with the foreign exchange market for a long time, the direction of transactions does not play a decisive role, the main thing is that the position is opened precisely according to the trend.

What is the difference between a bull market and a bear market?

Bull market - bulls predominate here, that is, those traders who open transactions to buy currency, thereby stimulating demand and causing an even greater increase in the exchange rate.

This is the most optimistic part of traders, expecting good news for the base currency in the currency pair. As a rule, at such moments there is an upward trend , but you should not rush to open purchase transactions; you must first find out how long the price has been rising and what are the prospects for a trend reversal.

A positive trend can exist until strong negative news is released or until it enters an overbought , when the price reaches its maximum level and begins to move in the opposite direction.

A bear market can also be called a pessimistic market, since most players here hope for a price reduction and place orders to sell.

The price of a currency pair is constantly falling under the pressure of negative news and an ever-increasing number of orders to sell the currency.

Sometimes it is in a bear market that it is more profitable to make a purchase; the main thing is to catch the moment when the price reaches its bottom and drops into the oversold zone, but at the same time you should be as careful as possible and not mistake the correction for a trend reversal .

It’s quite easy to recognize what moods are currently prevailing on Forex; to do this, just look at the feed of recent events and evaluate the current price movement.

It should be noted that it makes no sense to engage in such analysis on time periods shorter than H1; in this case, it is best to use only technical analysis .

Which option should you choose to open trades?

What plays a big role here is not what kind of bearish or bullish market is at the moment, but how strong the trend is, how long ago the event that caused the existing trend occurred.

The main signals for opening transactions will be:

• The recent occurrence of significant news that caused a price reversal or accelerated an existing trend.
• Significant volumes of transactions for the selected currency pair or other asset confirm the prevailing trend
• Confirming readings of technical analysis indicators that speak in favor of the existing trend.

And in which direction the price is moving and who currently dominates the exchange floors is completely unimportant.