Warren Buffett is a famous saying - Warren Buffett, the global money market expert, says: -
“When you build a bridge dedicated to crossing a total tonnage of 10 tons, it is better for you to build it to withstand 30 tonnes, and this applies to investing in stocks as well.”
This is an indication of the importance of the reserve, and the expectation is always bad when it comes to investing in stocks, or financial markets in general. The more you deal with the market, the more you become convinced of the fact that prices are determined by the psychological changes of market participants between fear and hope.
The bull is a strong symbol of the market, in which traders are optimistic and confident of the direction of the economy, and this is reflected in the performance of the market, which is heading higher in the first place, as the joyful investor psyche leads the two transactions to buy more and more, and leads the market up.
But do you think it has a direct relationship to bullfighting really? Where did this analogy come from?
First, let us note that Crowd Behavior is a strategy developed by animals as one of the strategies to deal with the risks surrounding them, so we find that fish always go in one mass, and they go in one direction once the sense of danger, in this way the fish reduce the number of those exposed to loss In times of danger, we also find that the cow herd runs in one direction when a warning signal is issued about any danger from a member of the herd.
This is called the dealers in the financial markets, the word herd, because the behavior of dealers in the stock market is similar to the behavior of the herd, so we find them rushing towards buying or selling according to their psychological expectations, which are based on the fear of loss or the tendency to profit, and then we find that profit is the one who exploits a rush The herd is in his favor, and is not led in the same direction. This applies to investors in securities, currencies, real estate, gold and silver, oil, or any other commodity.
Financial markets are a grouping of a group of people, who act according to what their feelings dictate to them at a certain time or moment, either by buying or selling, and these decisions are always either motivated by feelings of fear or greed, so the rise or fall of the market is an expression of Its general feelings, or herd behavior as it is called in the language of economics.
The origin of the story and beyond
Back in time when California was under Mexican rule, bullfighting was the only amusement favored by its miners, and over time, as a matter of change, some Mexicans added an innovative type of fight they raised between bulls and bears.
Although this type of battle was fiercely fierce, it was in most cases short, soon ending either as the bull flattened the bear with all force and tossed it into the air, or the bear was able to repel the bull's attack, throwing it to the ground using his large sharp claws to break his neck And eliminate it.
This last type of wrestling was inspired by the Spanish writer Joseph de la Vega - Don Jose de la Vega, and behind the launch of the term bull and bear on dealers in the financial market, he was therefore the first to use this description in the year 1688, in order to express it The two parties are buyers and sellers, who do not stop fighting to impose their will on the market and determine the direction of prices in it.
With the discovery of gold and the activity of mining stocks trading activity in both San Francisco and New York, then transactions flourished a lot during the American Civil War, the use of the term bull and bear in the writers of commentators on what is going on in the financial markets, and gradually the term settled in the language of the stock market, until it became from the words Listed in the debates of speculators, investors and money market dealers.