Every trader must understand what it means to be bullish, bearish, long, and short. These fundamental terms are frequently used in financial news, trading articles, market analysis, and financial conversations. Whether you are day trading, investing long-term, or just joining a conversation, you can benefit from learning the definitions of these terms.
Long
If you are “long” on a stock, it means you own it because you expect its value to increase and turn a profit.
For example, let’s say you own 100 shares of ZYZY stock at $10.00 per share, for a total of $1,000. Then you sell the stock at $10.40 per share, receiving $1,040 and making a profit of $40. In this case, your long position would have been profitable. If the price drops to $9.50, your long position would not be profitable because you would lose $50.
Short and Short Selling
Traders can also sell stocks at a high price and buy them back at a lower price, known as short selling. This is when you try to profit from the decline in value of a stock. Essentially, you borrow the asset, sell it, and then buy it back at a lower price to realize a profit.
Note: In the futures and forex markets, you can short at any time. In the stock market, there are more restrictions on which stocks can be shorted and when. Regardless of the market, if someone says they are shorting, it means they believe the price will drop.
For example, if you short 100 shares of ZYZY at $10.00, you will first sell them and receive $1,000 in your trading account. However, the negative share balance will show as 100 shares. You must return the negative share balance to zero at some point by buying back the 100 shares.
So, later on, after the stock price drops, you buy 100 shares for $9.60 each, at a total cost of $960. Since you initially received $1,000, buying back the shares for just $960 gives you a profit of $40. However, if the price instead rises to $10.50, you would lose $50 (additional cost of $0.50 × 100 shares).
Bull or Bullish
Being long or bullish is a bullish act. Essentially, it means you believe the asset will increase in value. To say that a trader is “bullish on gold,” for example, means the trader believes that the price of gold will rise.
Being bullish can represent an opinion or an action. A bullish person may go long on the assets they are bullish on. Alternatively, they might have an opinion that the price will rise but decide not to make any trades based on that opinion. Bullish positions can be very specific opinions about a single stock or broader opinions about the market as a whole.
Note: “Bullish,” “bull,” and “long” are often used interchangeably. For example, a trader might say, “I am long on that stock” or “I am bullish on that stock.” Both statements mean they believe prices will rise.
A bull market is when the price of an investment rises – this is called an upward trend – typically over a sustained period, such as months or years.
Bears or Bearish
Being bearish is the opposite of being bullish. It is the belief that the price of an asset will fall. If a trader says they are “bearish on stocks,” it means they believe the price of stocks will decline.
May…
The person holds bearish opinions about a particular company or a wide range of assets. A trader who has bearish opinions may choose to act on those opinions or not. If the trader decides to do so, they may sell the shares they currently own or may go short.
A bear market occurs when the price of an investment – called a downward trend – generally declines over a sustained period, such as months or years. Bearish or bullish opinions should be acted upon based on a specific trading strategy.
Frequently Asked Questions
What is a bullish engulfing pattern?
A bullish engulfing pattern occurs when a white candle covers a black candle. A candle is a chart of the prices of securities that shows the high, low, opening, and closing prices for a specific period (usually one day). A black candle is when a stock closes lower than the opening price and the price it closed at previously. A white candle is when a stock closes at a higher level than the opening level, showing a bullish or upward trend.
What is bullish momentum?
Bullish momentum is when a stock begins to rise after previously trending downward or in a bearish direction. Momentum refers to a larger trend and is different from a reverse divergence, which is a counter movement within a trend that does not change the overall path of the trend.
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Sources:
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts in our articles. Read our editorial process to learn more about how we verify facts and maintain the accuracy, reliability, and quality of our content.
U.S. Securities and Exchange Commission. “Buying and Selling Stocks: Long and Short.”
Mario Singh. “17 Proven Forex Trading Strategies: How to Profit in the Forex Market.” John Wiley & Sons, 2012.
U.S. Securities and Exchange Commission. “U.S. Securities and Exchange Commission Approves Short Sale Restrictions.”
U.S. Securities and Exchange Commission. “Key Points on SHO Regulation.”
U.S. Securities and Exchange Commission. “Bull Market.”
U.S. Securities and Exchange Commission. “Bear Market.”
Source: https://www.thebalancemoney.com/what-do-long-short-bullish-and-bearish-mean-1030894
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