What is a 'Bull'
A bull is an investor who thinks the market, a specific security or an industry is poised to rise. Investors who takes a bull approach purchases securities under the assumption that he can sell them later at a higher price. Bulls are optimistic investors who are presently predicting good things for the market and are attempting to profit from this upward movement.
BREAKING DOWN 'Bull'Bullish investors are those focused on identifying securities that are likely to increase in value and directing available funds toward those investments. In regard to stock purchases, a bull invests when he believes share prices are set to rise. In bonds, bulls are looking for investments where they anticipate the value of the underlying security to rise.
Opportunities to assume the position of a bull investor exist even when an overall market or sector is in a bearish trend. Bull investors look for growth opportunities within the down market and may look to capitalize should market conditions reverse.
Bulls and Risk Mitigation
To limit the risk of losses, a bull may employ the use of stop-loss orders. This allows the investor to specify a price at which to sell the associated security should prices begin to move downward. Additionally, these investors may purchase puts to help compensate for any risk present in a portfolio.
Bull investors must be cautious of what are commonly known as bull traps. A bull trap exists when an investor believes a sudden increase in the value of a particular security is the beginning of a trend resulting in the investor going long. This may lead to a buying frenzy where, as more investors purchase the security, the price continues to inflate. Once those interested in purchasing the security have completed the trades, demand may decline and lead to lower associated prices for the security.
As the price declines, bull investors must choose whether to hold or sell the security. If investors begin to sell, the price may experience further decline. This may lead a new round of investors to begin selling their holdings, driving the price down even further. In cases where a bull trap did exist, the price of the associated stock often does not recover.
Bear and Bull Investor Comparison
A bear is the opposite of a bull. Bear investors believe that the value of a specific security or an industry is likely to decline in the future. For example, if you are bullish on the S&P 500, you attempt to profit from a rise in the index by going long on it. Bears, in comparison, are pessimistic and believe that a particular security, commodity or entity is set to suffer a decline in price.
Bullishness and bearishness do not necessarily apply only to the stock market. People can be bullish or bearish on just about any investment opportunity, including real estate or commodities, such as soy beans, crude oil or even peanuts.