Community

Four Animals To Get Familiar With If You Want To Start Trading

You're new to trading and you want to get started on the forex and commodities markets. Trading has to do with a lot of charts and figures of course. So why is everyone talking about bears, bulls, doves and hawks? Here's why.

Posted on
Via istockphoto.com

Traders and analysts will use the terms "bearish" and "bullish" to describe overall stock market trends, in addition to trading trends on the commodity, currency and bond markets. On the other hand, they'll use the terms "dovish" and "hawkish" to explain monetary policy and specific policymakers' stances on the issues of interest rates and inflation.

Market players use the bull and the bear to describe not only trends in the stock market, but also in commodities, currencies and bonds trading. The terms "bullish" and "bearish" markets have to do with how both animals defend themselves again attacks.

1) A bull fights off an opponent by jerking its horns upward and throwing him into the air. Thus, when markets are bullish, it means traders are feeling confident and optimistic about the future. Stocks are up and are likely to continue to rise.

2) A bear, in contrast, fends off an opponent by swatting him down with its paws. Therefore, when markets are down and traders are feeling gloomy about the future, markets are described as bearish.

While the bull and the bear are used to describe market trends, the hawk and the dove, meanwhile, are used to describe or explain monetary policy — a key part of which is regulating interest rates. These too have to do with the nature of both animals.

3) Hawks are aggressive animals with their eye focused on the target. Thus, monetary policymakers who are aggressive and somewhat obsessed with a particular area of policy (especially inflation) are often described as hawks. Most common, if a policymaker is especially concerned with inflation and interest rates, and pushes for higher rates, he would be described as an inflation hawk.

4) Doves are a symbol of peace. Their nature is the exact opposite of the hawk, as they mind their own business and aren't on the attack often. So, policymakers who advocate for lower interest rates, believing that their power to affect the overall economy is minimal, are called dovish.

Get it, got it? Good. We hope we helped you make sense of all that market jargon so you can make better trades.

If you have questions, email us at wbponline@wbponline.com. Also be sure to follow us on Twitter, Facebook, LinkedIn and StockTwits @WBPOnline.

Every. Tasty. Video. EVER. The new Tasty app is here!

Dismiss