Not every beginner, who has just joined a Forum of the currency traders, can easily understand what these animals’ names mean in terms of the currency market. However, professionals often use them for naming each other. The bulls, bears, pigs and chickens do not make a full list of the animals’ names, which are used relating to the traders at Forex.
How do these names appear in Forex?
There are three theories, explaining how these nicknames came to Forex. The most common explanation - is the comparison of a trader and a Mexican Caballero. People, watching their fights in California, compared market participants’ actions with the behavior of the bulls and bears. The bulls, attacking their victims, toss them up, which is similar to the actions of the traders, who actively buy assets in order to boost prices. Bears, on the contrary, try to trample down their victims, similar to the sellers, who try to sell assets, provoking price dumping.
According to the next version, John Arbuthnot, a satirist is believed to be the author of the nickname a “Bull”. In 18th century he put up a show in London, where a typical Englishman was portrayed under the name of John Bull. An actor, playing this role, had a cane and wore a vest and top hat. He also had a bull mask on his face.
According to the third version, in the 18th century, the English traders, in order to maximize profit, often sold bears’ skins, (which they still needed to catch) trying to lock-in the highest price. Actually, their actions were the first short trades. The same actions had been taken by the sadly remembered company “South Seas”, which ended in the bankruptcy of many investors.
Bears and bulls: major differences
The bulls are considered to be optimistic traders, as they base their trading strategy on the rise in price. They prefer to open only long positions and enter the market at the time of the highest profit. Although, the bullish trend can change, (as the prices in the market can grow and fall), aggressive bulls still believe that the price will go up, and continue to carry out only buy transactions, even when fundamental factors are unfavourable.
Bears, on the contrary, are always pessimistic, expecting that the prices will sooner or later go down, or have. Bears always try to sell assets, in the hope that some time later they can repurchase them at the lower price.
It is more appropriate to speak about bullish or bearish sentiments in the market, as trends are permanently changing, depending on the market developments. For example, the trader who opened the position at the beginning of the uptrend can receive a signal to terminate a trade, as the trend is going to reverse. In accordance with this signal, a trader closes a long position and opens a new, short position, thereby, changing from the bullish to the bearish trend.
Pigs and chickens
If the “Bears” and ‘Bulls” can easily exchange their roles, some other investors do not easily change their trading patterns, allowing professional traders to earn money. Experienced traders call them the pigs.
There is an expression in English language “greedy pig”, which was borrowed to give a nickname for this type of traders.
Pigs are greedy traders, who wish to receive the maximal profit in the shortest possible time. Pig traders often:
- Open risky transactions;
- When selecting trading instrument, they primarily think about percentage of profit;
- Keep opened positions for too long, in the hope to receive high profit.
Chickens are the opposites of the pigs. Chickens are very cautious traders, who are fearful of losing their money. Fear is a bad counselor in trade; that is why chickens often:
- enter the market when it is too late, awaiting for as precise signal;
- try to find the most precise indicator, which will give 100% accurate forecast;
- they often close trades far too soon after opening, locking in a small profit and missing the opportunities of getting a larger profit;
- do not close unfavourable positions in the hope that the price will go back to the original level.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.