Bull (Investor) - Explained
What is a Bull Investor?
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Table of ContentsWhat is a Bull?What are the Characteristics of a Bull Investor?Bulls and Risk MitigationBull TrapsBear and Bull Investor ComparisonAcademics Research on Bull Investments
What is a Bull?
A bull is a term that describes a situation in the market and investors that exhibit certain traits. In the stock market, a bull is an investor who buys a security or stock with the expectation that the stock will increase in price and they will make a profit. Bullish investors are sometimes called speculators, these are traders that purchase certain stock hinging on the expectation that it will increase in price.
What are the Characteristics of a Bull Investor?
Generally, bullish investors have high confidence in the upward movement of stock prices in the market. Such investors take a position with the belief that the market will climb higher and they would make significant returns. Investors exhibit bull tendencies when the market is in a bearish phase, this is due to the fact that after the end of a bearish trend, what follows a bullish pattern. Bull investors are generally optimistic, such investors expect an upward movement of prices of stock in the market.
Bulls and Risk Mitigation
In certain cases, the expectations of a bull investor might not fall true given certain market conditions. For instance, if an investor buys a stock hoping for an upward movement of prices and there is a reverse market condition, losses can be incurred. Bull investors take some measures to limit the risk of losses when they take certain positions in the market. The use of stop-loss orders and puts purchase are common methods that bull investor employs to mitigate risk. In a stop-loss order, an investor is able to set a limit at which the stocks will be sold in the event of a downward movement of price.
Bull traps are a common occurrence in bull markets, investors who purchase stocks in the market with the expectation to make profits form an upward movement in price must pay attention to this. Bull traps occur when an investor takes a long position in a security based on the sudden increase in the price of the security which might only be temporary in the actual sense. For instance, Mike is a bull investor who purchases stock A with the expectation that it will increase in price, suddenly, Stock A begins to increase in price and Mike continues to hold on to the stock thinking that the increase in price will continue for long. After a short while, stock A begins to decline in price, this is a bull trap. It is at this point that Mike must decide whether to sell or continue holding the security whose price might encounter further decline.
Bear and Bull Investor Comparison
The opposite of a bear is a bull, a bear investor makes a purchase in the stock market believing that the price or value of specific security will decline in the nearest future. Bearish investors exhibit traits that are totally different from bullish investors, for instance, such investors are highly pessimistic and expect a general decline in the stock market. Bear and bull are not only applicable in the stock market, but they are also traits that can occur in different sectors and industries such as real estate. Investors can be bearish or bullish for certain reasons best known to them or as a result of market analysis.