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Bullish Forex market
The common picture that is evoked in one's mind when picturing a forex bull is that of a bull charging ahead. A bull brings a smile and happy faces of traders, brokers and investors alike and when the forex is having a bullish run, it's time to let the money pour in.
A bull represents vitality and power. A charging bull attacks it hapless victim by raising its horns up. This raising of the horn indicates an upswing in the forex exchange and the stock market alike.
There are many varied factors favoring a bullish run in the forex exchange. These include:
- Investor confidence in the markets
- A strong economy
- A path breaking policy decision of one of the governments
- Investor speculation
The most common of them all is investor speculation. When all the signals seem to be good, an investors speculates that the forex is going to become much better in the coming days and with an intention of making better returns starts putting in more money and influence by increasing his leverage.
One of the most common pitfalls that a trader falls into during a bull run is blindly following others without knowing the basic, sound market principles. Since, most of the bull run is fuelled by investor speculation, there is no telling when the investor mood may change and the market suddenly come crashing down along with all your dreams of big money!
It's always best to study the fundamentals of forex. Since mostly forex operates on a speculation market, it's handy to know how strong a country's economy is. Once this is studied, it's possible to conclude, whether the exchange rates are over hyped and whether it's best to sell. Doesn't increase your leverage during a bull run is what market pundits opine. Increasing your leverage obviously increases your profit. But do remember, since the forex is being purchased at a high rate in the first place, the profit margin won't be much. And if the market suddenly breaks into a bearish run, your losses will be quite astronomical.
Best things to do
Don't get too excited when the forex is in a bullish run. It's the time to make wise choices. It's when the market is in a bullish run, that you may find it difficult to sell. Study the developments and logically make a decision to sell. Forex is a very volatile market and there is no telling when it makes take a turn for the worse and enter a bear run.
Always keep a stop loss in place. This will limit your losses in case there is a sudden reversal of fortunes.
Most importantly, never be lulled into a false sense of security with the forex doing well. Keep on regularly reading and analyzing all the market reports and analysis. And always trust your head over your heart. It's sometimes difficult to do so, but the heart can never be as logical as the head.