Foreign exchange allows traders to become the buyer or seller of a currency. As we showed earlier in the Currency Pairs guide, there is a base currency and quoted currency.
Every trader will have their own idea of whether they are going to buy or sell a currency. This often depends on their information sources, needs and experience. We will see shortly in the guide how historical price movements have an effect on future price. This is often visualized with candlesticks as mentioned in the Charting guide.
Why Do They Call It Bull & Bear Markets?
Bears and bulls were once considered opposition in blood fight matches. Bulls are known to charge and swing their heads upward, whilst bears swipe their paws down.
Traders and markets are referred to as Bulls (or Bullish), when an economy is performing well. This is often when there is low unemployment rates, Gross Domestic Product (GDP) is growing and the country’s stock market is rising.
Bullish markets can last for months, even years in some cases.
The USD/JPY exchange rate had a Bullish outlook from July 2012 to June 2015.
Traders and markets are referred to as Bears (or Bearish), when an economy is already performing badly or the projections are thought to be bad. A high unemployment rate, flat line or declining GDP, or stock market falling are some examples of bad performance.
Meanwhile, projections can be in the form of discouraging news, such as natural disasters, terrorist attacks, and recessions.
An example of a bearish market is the USD/JPY exchange rate from July 2007 to January 2012.