Saturday, November 1, 2008

The Bear The Bull and The Bumble Bees

Anyone who invest or read regularly should know what a Bull or Bear Market means in Financial Term. But have you ever wonder why they are given such names? Why don't we call them a Cat or Dog Market, or Tiger or Lion Market?
They becomes metaphors for the movement of a market. If the trend is up, it's a bull market. If the trend is down, it's a bear market.

Let understand what is a Bull and Bear market.
* A bull market tends to be associated with increasing investor confidence, motivating investors to buy in anticipation of future price increases.
* A bear market is described as being accompanied by widespread pessimism. Investors anticipating further losses are often motivated to sell, with negative sentiment feeding on itself.

How does the terms come about?
* Firstly, the use of "bull" and "bear" to describe markets comes from the way the animals attack their opponents. A bull thrusts its horns up into the air while a bear swipes its paws down. * In short, a bull attack upwards and a bear attack downwards.
* Secondly, bulls and bears are very strong animals. They are very agressive and will fight with all their strength and might. This explains why the stock market rises or falls that furiously during a bull or bear run.
* Thirdly, a bull normally charge at a very high speed whereas a bear is normally lazy and sleep most of the time. This explain why people don't invest during bear market.

How Bumble Bees come into the picture then?
* Bumble Bees are investors like you and me who diligently buzz around the financial market regardless its a bull or bear market. This explains why financial market will not die because there will always be people investing. This also explains why it never fails to recover from a bear market.
* Bumble Bees like to follow each other, do the same thing and don't bother to think. It explains the herd behavior of investors. When you buy, I buy. When you sell, I sell. Don't need to think so much.
* When the bee hive or colonies are disturbed, they get panic easily and buzz around to sting people. It explains why investors always get panicky and causes the financial market to fall below rationale level.

Now, you know about Bull and Bear markets. So do you want to be a Bumble Bee???

No comments: