Reviewed by Sep 28, 2020| Updated on
An investor who thinks the stock market, a specific security or a particular industry, will rise is called a Bull investor. These investors adopt the bull approach where they purchase the securities under an assumption that the securities will be sold at a higher price later. They are optimistic investors who are attempting to gain from the rising movements in the stocks.
A bull investor believes that the market will show an upward movement over a period. They identify the securities whose value is likely to rise and direct funds available towards such investments. They are just opposite to the bear investors who believe that the prices are going to decline in the future. Even if the market or industry is in a bearish trend, opportunities for bull investors still exists. They look for growth opportunities within the down market and also look to capitalize on the reversed market conditions.
The bull investors may fall under the bull traps, i.e., sometimes they confuse the short term blips for a rising trend in prices. This can lead to a buying insanely where, as more investors buy the security, the price continues to rise. Once those interested in buying the securities have completed their trades, demand may decline and lead to lower prices for the security or stock.
As the price goes down, bull investors must choose whether to hold the security or sell it. When investors begin selling, the price may further decline. This may attract a new group of investors to begin selling their holdings; this will drive the price further down. In cases where a bull trap did exist, the price of the stock often does not recover.
They can limit the risk of losses by employing stop-loss orders. This allows the investor to fix a price at which the security should be sold when prices begin to move downward. Additionally, these investors may buy puts to help compensate for any risk present in a portfolio.
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