Which Trading Animal You Are?

The stock market is a place where a very interesting game goes on. And in
a game there are winners as well as losers. Seeing the outlook of the traders they
can be classified into four animals.

There are bulls, the bears, the chicken and the pigs. Which animal you
are?


A bull market is when everything in the economy is great, people are
finding jobs, gross domestic product
(GDP) is growing, and stocks are rising. Things are just plain rosy! Picking
stocks during a bull market is easier because everything is going up. Bull
markets cannot last forever though, and sometimes they can lead to dangerous
situations if stocks become overvalued. If a person is optimistic
and believes that stocks will go up, he or she is called a
“bull” and is said to have a “bullish outlook”.



The Bears


A bear market is when the economy is bad, recession is looming and
stock prices are falling. Bear markets make it tough for investors to pick
profitable stocks. One solution to this is to make money when stocks are
falling using a technique called short selling. Another strategy is to wait on the sidelines until
you feel that the bear market is nearing its end, only starting to buy in
anticipation of a bull market. If a person is pessimistic, believing that
stocks are going to drop, he or she is called a “bear” and said to
have a “bearish outlook”.



The Other Animals on the Farm – Chickens and
Pigs


Chickens are those traders who are afraid to lose
anything. Their fear overrides their need to make profits and so they turn only
to money-market securities or get out of
the market entirely. While it’s true that you should never invest in something
over which you lose sleep, you are also guaranteed never to see any return if
you avoid the market completely and never take any risk. 



Pigs are those traders who high-risk investors
looking for the one big score in a short period of time. Pigs buy on hot tips
and invest in companies without doing their due diligence. They get impatient, greedy, and emotional about their
investments, and they are drawn to high-risk securities without putting in the
proper time or money to learn about these investment vehicles. Professional
traders love the pigs, as it’s often from their losses that the bulls and bears
reap their profits.



What Type of Investor Will You Be?



There are plenty of different investment
styles and strategies out there. Even though the bulls and bears are constantly
at odds, they can both make money with the changing cycles in the market. Even
the chickens see some returns, though not a lot. The one loser in this picture
is the pig.



Make sure you don’t get into the market before
you are ready. Be conservative and never invest in anything you do not
understand.  Before you jump in without
the right knowledge, think about this old stock market saying:



“Bulls make money, bears make money, but
pigs just get slaughtered!”

 

Diveya Alok Simon

www.capitalvia.com

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