• Bearish vs Bullish Definition

  • The Bearish vs Bullish Definition

    When traders look at markets they often only look for a bearish vs bullish definition of the market. This is not the way that markets trade. Markets are in a trading range more than they are in a bullish or bearish trend.

    There are only three ways a market can go; up, down or sideways. A market going up of course is a bullish market and a market going down is a bearish market. But what is a market called that is in a trading range? It’s called a sideways market and like I said, markets tend to be in a trading range more than in a bullish or bearish trend.

    To know which way the market is trending you first must know that the definition of a bullish market, a bearish market and a sideways market.

  • Bullish Market Definition

    A bullish market is also considered being in an uptrend but what exactly is an uptrend? An uptrend is a SERIES of higher highs and higher lows. Notice I said a series! Do I need to explain what a series is? Here’s a brief explanation; a series is more than one!

    This means that you have to have a higher high than before, followed by a higher low and this has to be done more than once; hence the definition, series.

    Many traders see a market that looks like it’s bottoming out and then they see prices jump up for a few days and tell themselves that they market has now become Bullish. This is WRONG and this is one of the reasons why traders lose money. How many times do I have to say “SERIES”?

    Let’s look at a chart and I will show you what I mean.

  • Bearish Definition Video

  • I’ve drawn out four points on this chart; point A, B, C and D. When I first started looking for a trend reversal from a bearish market to a bullish market was a point “A”. Then point “B” had the first higher low. Then we look for the second higher high which was point “C”. The “SERIES” started when point “D” formed which was the second higher low. I would say that the market became bullish when price broke past point “C” as you can see in the chart below.

  • Bearish Market Definition

    A bearish market is also considered being in a downtrend but what exactly is an downtrend? A downtrend is a SERIES of lower highs and lower lows. Notice I said a series!

    This means that you have to have a lower high than before, followed by a lower low and this has to be done more than once; hence the definition, series. We’ve already talked about that so let’s look at it on a chart.

  • Bearish Definition Video

  • What we have now is a very obvious downtrend. Notice this time I used the 1-2-3 tool rather than using the letters A, B and C. It doesn’t really matter which one you use as long as you use it. Notice in the above chart how many SERIES we had and what a great downtrend we had during this time.

  • The Downtrend

  • Sideways Market Definition

    Remember I said that markets can go up and markets can go down but markets can also go sideways. Sideways markets are also called Trading Ranges. I prefer to call them Trading Ranges so that is how I will refer to them.

    Did you know that all markets at some point go into a trading range? There never has been a market that has always gone up, come back down, gone back up, come back down, etc. At some point the market needs to take a break and that’s when Trading Rangers are formed. About now you might be telling yourself that all this sounds good but what is a Trading Range and how can you spot them. That’s a good question but a hard one to answer. Why? Because a Trading Range is when a market is trading between the highs and lows on a chart. Right? Well here is something to think about; all markets are always in a trading range! Just how big a trading range it’s in is all that matters. There are narrow sideways markets, where price action is not very large and then there a large trading ranges where price action is far apart.

    For most traders these can be very difficult to trade, especially the narrow sideways ranges. They can be traded buy this article is not about how to trade them. I will leave that for another time. All I want you to see right now is that markets can have three different directions; up, down and sideways.

    Maybe you have heard someone say that a certain market is really choppy right now. That’s all well and good buy first you have to ask yourself “What is a choppy market”?

    There is a really simple answer to that and here it is. A choppy market is a market that is not trending. In other words, the market is not bullish or bearish. Remember I said earlier that all markets at some time go into a trading range?

    I’m sure you have heard the expression; the trend is your friend. Well it’s true and the majority of your winning trades are going to be in trending markets, not choppy markets.

  • Just remember when you are looking at a market remember the Bearish vs Bullish Definition and for now only trade the trending markets and not the trading ranges.

  • 1 comment

    Really helpful article.