Understanding the important trading conditions is an essential skill for successful binary options traders. This article explains the 4 most important terms – bulls and bears, vipers and hawks.

  • What do bullish and bearish mean?
  • How can I trade bullish and bearish with binary options?
  • What do Dovish and Hawkish mean?
  • How can I trade Dovish and Hawkish with binary options?

This knowledge will help you understand what financial experts mean when they talk about this term and how to use this trading option (and associated sentiment) with binary options.

 

 

What do bullish and bearish mean?

The terms bullish and bearish define whether a trader believes that an asset’s price will rise or fall in the future. It is also used in hindsight to describe a rising or falling market. These are trade terms commonly used by the media.

  • Bullish: When traders are bullish on an asset, they believe the price will rise. Bull markets are characterized by rising prices.
  • Bearish: When a trader is bearish on an asset, they believe the price will go down. A bear market is characterized by falling prices.

After the 2008 financial crisis, the market was bearish. The Dow Jones lost more than half of its points, and stock indices around the world suffered similar losses. Since then, the market has strengthened again and set new records.

How can I trade bullish and bearish sentiment?

Bulls and bears are important terms for binary options traders. The simplest way to link a term to a transaction is:

  • Invest in rising prices in bull markets and when traders are bullish on an asset.
  • Invest in declining prices in bear markets and when traders are bearish on an asset.

There are several ways you can do this.

  1. Read the news. This news is a good source to understand how traders are feeling. There are plenty of interviews with traders and even professional trading magazines, but you can also read regular news and connect the dots for yourself. When the company faces legal battles, traders are probably bearish. When a company posts record profits, traders are probably bullish.
  2. Subscribe to our newsletter. We have a special newsletter where traders tell us how they feel about the market. For example, when a big analyst recommends buying or selling a stock (because the stock is bullish or bearish), this newsletter will tell you. You can then trade the effect of the recommended options with binary options.
  3. Use technical indicators. There are technical indicators such as bull and bear indicators that aggregate information about how traders feel about the market. Some of them use mathematical calculations based on price action, some rate multiple newsletters and compare negative testimonials to positive ones. The absolute value of these indicators and their evolution over time can tell you where the market is going.

These sources can tell how traders feel about the market. There are also oscillators, another type of technical indicator that indirectly measures bullish and bearish momentum.

Technical indicators such as the Relative Strength Index (RSI) relate the number of assets purchased to the number of assets sold. Their goal is to understand whether money is flowing into or out of an asset. It helps traders understand how they feel about an asset without having to ask every trader directly.

For traders: This indicator also helps to understand the ironic twist that being too bullish or too bearish they will often cause the exact opposite of what is intended. For example, if all traders were bullish on an asset, soon all of them would have invested in it. There’s one thing left now, but some of the many traders who bought it will think about selling it. The result is a surplus of demand, and prices will fall despite an overwhelmingly rising market.

Bullish and bearish are great indications for what you need to do. But beware when everyone is bullish or bearish.

What do dovish and hawkish mean?

Pigeons and hawks are terms used to describe government fiscal policy. Like bulls and bears, they describe opposites, but this time with fiscal policy.

  • Dovish: Dovish outlines a broad fiscal policy. Low interest rates make credit cheap and savings non-profit, while rising government debt creates new money. The two effects combine to flood the market with money. Central banks usually stimulate economic growth but are inventive when they accept the downside of rising inflation.
  • Hawkish: Hawkish describes a restrictive fiscal policy. High interest rates make credit expensive, savings increase profitability, and reducing government debt reduces the amount of money available. The two effects combine to bring money out of the market. Central banks usually want to fight inflation but are hawkish when they accept the downside of restricting economic growth.

After the great crisis of 1923, the government tried to save as much money as possible in response to the hawks. After the 2008 crisis, the government responded dovishly to spur economic growth through debt and low interest rates.

 

 

How can I exchange dove and hawk emotes?

To understand how hawkish and ingenious fiscal policies affect binary options traders, consider the impact of both policies.

A pious fiscal policy will boost the market

When the government floods the market with money while simultaneously making savings non-profit, this money has to go somewhere. Many people will invest in stocks, which are the only viable investment option. Additionally, having more money available can increase economic demand, allowing the company to generate record earnings.

As inflation rises, the stock market should also rise significantly. If the price of bread rises from £1 to £2, the price of a stock trading at £100 must rise to £200 to reflect the decrease in the purchasing power of the currency. For example, if the price of Coke doubles, Coca-Cola’s profit doubles as well. Even if the company does not increase in value, the same value is now displayed at a price twice as high.

Taken together, stock markets will rise as long as pious fiscal policy holds.

Halonic fiscal policies limit economic growth

When the government acts hawkish, it has the opposite effect of fiscal fiscal policy. It limits inflation. This means the stock has to rise less to reflect the decline in purchasing power. It also takes money out of the market and makes savings more attractive. So people will invest less than stocks and prefer other investments. Combined, stock market operations will lose energy.

Now, none of that is to say that hawkish fiscal policy will hurt the economy or ruin markets. In a well-functioning economy, central banks must be somewhat hawkish to prevent uncontrolled inflation, poverty, and other disastrous effects. This is why markets can continue to rise in regions where fiscal policy is difficult.

How to Trade Dovish and Hawkish Fiscal Policies

Importantly, stock traders prefer hawkish fiscal policy, as it pushes stock prices higher than fiscal policy. They care about stock prices, not smart policies. This is an important trading condition.

Binary options traders need to understand this connection and trade accordingly. Binary options traders can directly trade the effects of both policies by investing in long-term binary options. These options have expiry periods of months and years, allowing them to take advantage of underlying market influences such as fiscal policy.

It is recommended to use for market indices instead of single stocks. A single stock is subject to many other influences, such as good and bad management and technological progress. It may fall despite broad fiscal policy. But the market as a whole must react to fiscal policy. When the market is flooded with money, this money has to go somewhere. Stock indices will reflect this inevitable connection and rise.

You can also trade market reactions to announcements reporting changes in the government’s fiscal policy. Most traders understand the connection between pigeon/hawkish fiscal policy and future stock prices, so they invest immediately in anticipation of the effects when central banks change base rates or governments take on more debt.

Conclusion

Understanding whether the government is behaving devoutly or hawkish can predict what will happen to the next market. Bearish and bullish are terms that describe how the market has behaved in the past and whether traders expect price increases in the future.

Both types of terminology are important to binary options traders and can be the foundation of a strategy. When properly understood and interpreted correctly, they provide specific forecasts and a deeper understanding of the forces driving the market.