Who are the bulls and bears on the stock exchange
Surely, many wondered where such animal names came from for top exchange players making investments in Russia and other countries. There are several versions of the occurrence of such names. According to one of the versions, which today has acquired the status of a legend, and to which most of the exchange participants are inclined, the concept of “bull” and “bear” was born in the beginning of the 17th century, when the market was just emerging. Scottish satirist poet Arbetnot perfectly mastered the pen and irony. The allegorical work, which was intended to cool the British desire for war, formed the ironic image that became the personification of Britain: John Bull, that is, the bull was described by the author as a man with a bull head, dressed with chic London businessmen of the XVIIIth century. Another equally well-known character of Arbethnoth was the persona Bear. In one of the satirical scenes between the two characters, a clash occurred on the London Stock Exchange, from which the name came.
The version popularized with economics textbooks is based on the fact that, in their attempts to earn a million, “Bulls” always play to increase, and “Bear” - to lower market quotations. And this has a completely logical explanation: the bull attack takes place with a horns strike from the bottom up, and the bear hits the paws from the top downwards, this is associated with the actions of traders: some enter the market and try to maximize prices, others - as low as possible.
According to the third version, the name comes from popular entertainment organized by Mexicans: fierce tournaments between real bulls and grizzly bears were popular in California and led to the fact that the grizzly bear was put on the brink of survival.
So, the “bull” and “bear” are traders on the exchange, whose work is based on a different strategy.
Bulls on the stock exchange
Bulls are called exchange traders who buy assets, predicting a progressive increase in prices. The activities of bulls are reduced to cheap buying and expensive selling of securities. The high turnover of assets purchased and the high return on investment make it possible for the bulls to earn on the price difference between buying and selling.
There is also the concept of a “bull market” - at this moment there is a tendency on the stock exchange to rise in prices for companies' assets, the base currency of operations also increases in price, while quoted currencies tend to fall in value. Such “bullish” moods that periodically cover the market cannot be unambiguously regarded as a positive phenomenon: while some of the participants receive significant profits (bulls), the other half of the players entering the market incur significant losses.
Long (bullish) position
The concept of a “long bull position” is also on the stock exchange. It lies in the fact that participants in the securities market - the so-called bulls - rely on the growth of undervalued companies with great potential. Bulls buy the assets of such companies and wait for growth, subsequently reselling the purchased assets with great profit.
Bears on stock exchange
The bear on Wall Street is a characteristic of stock traders who sell ("fold") securities, predicting a decline in quotations in a future period. That is the exact opposite of bulls. The activity that a bear leads is to sell securities as expensive as possible, wait for the maximum price reduction and buy these assets again at a cheap price. In fact, the bear earns on sales of what does not exist yet.
For example, it works as follows. Purchase of 10 shares of any company occurs in debt or bail. The bear immediately gets rid of these assets, for example, at a price of 150 rubles apiece. Thereby replenishing the stock account for 1500 rubles. In the future, having waited for a decrease in the value of assets, the bear buys back these 10 shares, but already at a price of 140 rubles per share, thus earning 100 rubles. Shares are returned to the owner along with the commission (for example, 1 ruble per piece). Thus, the net profit that a bear has is 90 rubles.
Short (bearish) position
Bear trade with which they enter the market is called a “short bearish position.” The activity that a bear has is reduced to predicting a decline in asset prices. At the same time, quite a lot of factors affect the stock price of shares. Among them may be negative reporting companies, and errors in the financial sector of the company, which entail losses, and a change of leadership, news of which will appear in the wide press. Thus, the bear bases its activity on forecasts.
Taken and translated from the site: https://www.iqmonitor.ru/investicii/forex/all/byky-medvedy.html
© Авторство контента на IQmonitor.ru защищено службами Яндекс.Тексты и Google Authorship.
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