Bears and Bulls : The relationship between the buyers and the sellers

415

Perhaps you have heard of the term bullish or bearish used as terms to describe the market. If you are not familiar with these terms , these terms refer to a market condition. A bull market is a “up” market, this is generally when things are good in the economy. The price of securities are on the rise, people are making money , the economy is doing well, unemployment is low and overall the financial climate is regarded to be good by most. On the other hand a bear market is a “down” market, the price of securities are on the fall and people are losing money from the market, economic growth is either stagnated or on the decline and unemployment is on the rise. In general people are not to excited about bear markets.

There are several factors that contribute towards creating a bear or bull market, such as political policy, monetary policy, tax rates etc… and depending on these factors investors are incited to buy or sell securities on the market. So in effect you can say that the market is shaped by buyers and sellers. Buyers and sellers trade or invest based on market sentiments. For example if there is a string of bad monetary policies issued by the reserve bank and investor confidence is lost and there is an increase in the selling of securities in the market, this brings the market down. How? The market is moved and priced based on the principles  of supply and demand. Therefore, when there is a huge supply (caused by an influx of selling assets ) and a low demand the price of these assets or securities drops , because of this the overall market  declines. A bear market is characterised by a lot of selling in the market that is not offset by buyers.

Buyers move the market up. When the market is performing well people are confident and more eager to invest in the market and purchase assets because they believe that they will increase in value. There are more buyers in the market then sellers, and now we have a high supply and low demand. This causes the price of assets to increase and the overall market to perform well.

Buyers and sellers are not fixed people in the market. There are people who do have a preference for one over the other , but in general you can navigate between selling and buying in the market with ease. As long as you position yourself well you can profit from the capital markets from both buying and selling.

LEAVE A REPLY

Please enter your comment!
Please enter your name here