On any financial market (including Forex), the prices on the charts are influenced by tendencies or trends. Every broker should be able to identify them because it can help them profit in the future. But let’s first talk about who the bulls and bears are in the market.

What does the Term Trend mean?

The trend or the primary direction of the price is also known as a trend. Many analysts and professionals advise opening positions following trends (in the direction of the main price movement). Additionally, they often use the terms “bearish trend” and “bullish trend”. Let’s understand what these are.

Who are the Bulls and Bears in the Market?

This stock market slang has been used since the emergence of exchanges in the United States. Bulls in financial markets are those who open buying positions. When there are more buyers in the market than sellers, prices will rise. This is similar to how a bull, when attacking, uses its horns to throw its victim upwards. This analogy gave birth to the above expression.

And bears in the financial market are those who open selling positions. When there are more sellers in the market than buyers, prices will fall. This is similar to how a bear, when attacking, uses its paws to knock its prey down. Therefore, this phrase is easy to remember.

Bullish and Bearish Trend

Logically, a bullish trend is called a period when the main market tendency is upward. Bulls raise the price because there are more of them than sellers. Therefore, the quote chart goes up because prices are rising. Synonyms for this concept are “bull market” or “upward trend”.

A bearish trend is a period when the price is falling. The main trend on the chart at this time will be downward. There become more sellers than buyers, and prices fall. This means that you should sell. Synonyms for this concept are “bear market” or “downward trend”.

Why this is Important

Advice on trading with trends is sensible and is given for a reason. When a trader sees the main direction of the market, it won’t be difficult for them to decide whether to open a selling or buying position. And when everyone in the market is selling (a bearish trend is reigning), buying will be disadvantageous, as you will incur huge losses. Therefore, sticking to the trend direction would be the most sensible decision.

In addition to trends, there is also the concept of “flat” in the market. Flats are periods when there is no clearly defined trend, and the price moves in a sideways corridor (a period when the price fluctuates within a corridor). Flats are not as predictable, so trading in them is more difficult. The situation indicates an equal number of bears and bulls in the market at this time. The market cannot decide whether to move up or down, so it’s better for traders to wait out this situation and wait for a trend to appear.

How to Identify a Trend

Bearish and bullish trends can be identified using the same tools. These tools can be visual chart analysis or lines with indicators.

Visual chart analysis helps understand the direction of the main trend, but it does not signal when the trend changes. Therefore, in this case, the best solution would be to rely on trading tools and techniques. For instance, you could use a trend line.

This is one of the simplest tools of technical analysis, but it needs to be used correctly. The moment when the price breaks through the line is called a change in the trend. At this point, you need to quickly decide whether you want to be a bear or a bull.

The Importance of Identifying a Trend Change

During a trend change, you will likely want to continue holding a buy trade. If you miss this moment, all your profit could be lost. You could even put yourself into losses. A trend reversal can quickly “help” you lose everything. Therefore, during a change of a bearish or bullish trend, the position will need to be closed.

Afterward, you can open a new position in the direction of the new trend to profit from it.