Can a bull market be dangerous?
- by Anna K.
Markets are plagued with eternal struggle – bears and bulls.
These two have been fighting since the dawn of time. And none of them can win. They are just changing each other in their place and set up trends for us to follow. But we all know about hazards in bear markets. They are falling and falling.
But bulls. Bulls are different. Even though in nature we wouldn’t do it, but in the market we want to befriend bulls and pet them as much as we can. BUT! They are still living in the markets. They are still dangerous as the markets are rarely, if ever, safe.
So. Are there dangers in the bull market?
Well of course.
For one, traders get over-confident. They do not think that they can ever lose. And why would they? They are in the bull market. They are on the rise! But that is not exactly true. While it is true that the bull markets are rising, there are still retracements happen. And these retracements can be huge and very unexpected making us lose and throw our hands up in the air in despair.
We believe in bulls too much. I would say there are days when we lay all our hopes on the uptrend, and we just leave it there. We hope that the trend is going to play a pivotal role in our earnings and thus we get too relaxed with our trading. But there is an obvious danger in that.
Leaving trades alone is never going to work for you and your money. You are just going to lose and that is all there is to it.
But the most dangerous thing about a bull trend is its longevity. That is right. We have been experiencing and living and trading in the conditions of a bull market since 2017. Of course, we wouldn’t see it but it is true. For 2 years we have been enjoying a growing market. And now every time they start talking about the possible reversal of this looooooong trend we start to freak out and send our assets into the selloffs.
Why does that happen?
The thing is that we do not remember or even know how to trade in the conditions of a bear market. Those who started trading in the last couple of years can be deemed experienced traders, but they do not imagine what trading and analysis in the conditions of the bear market looks like. And here we have the real threat and danger.
Markets are cyclical. And sooner or later we are going to come face to face with the bears. And those who are inexperienced in the field might go through a lot of huge losses and a lot of damage.
Of course, it is always good when the markets take their time to grow and rise giving us the possibility to relax, but it creates people who simply do not know how to deal with losses. But that is entirely another discussion.