Are we in a bull or bear market right now?
The answer seems to be surprisingly neither according to some market analysts.
2020 has been a year of many firsts even for the financial markets and now, a new state of market term is making traders scratching their heads: the kangaroo market.
But before that…
You need to understand the other states of market terms that are commonly used: bear and bull.
A bull market happens when there are steep rises in a stock market over a certain period. This usually occurs when the economy is great and things are just plain rosy.
Picking stocks when markets are bullish is easier since the trend is going up but do take note that this period doesn’t last forever since stocks are also prone to be overvalued.
On the other hand…
A bear market is the exact opposite in which stock market prices are on a downward trend and majority of traders simply just want to sell off their shares due to fears that the market value could drop even further.
Fears of recession, the economy is bad and a lot of people are losing jobs. That’s what happens when markets are in bearish territory and this is also the period when traders are having a hard time to pick profitable stocks.
So what is a kangaroo market?
A kangaroo market is a period marked with rising and falling prices over a period of time.
In comparison to bear and bull markets, there are no significant downtrends or uptrends with a kangaroo market.
This could also simply be the a sensationalized term for the “sideways market” since the characteristics are practically the same: no definitive upward or downward movement and prices trading within a horizontal range.
The game done changed. We’re in a kangaroo market now folks pic.twitter.com/aVQObpMzq9
— litquidity (@litcapital) June 12, 2020
We saw this kangaroo market take place between April to May 2020 when the market was generally going flat for a couple weeks and there was a lot of ups and downs and a lot of volatility.
But the overall trend is sideways and financial experts predict that we might be due for another one of these kangaroo markets as countries lie frozen in lockdown and an effective vaccine is yet to be manufactured for global use to end the ongoing COVID-19 pandemic.
You can call it a kangaroo market or simply a sideways market but one thing’s for sure, markets are experiencing volatility due to the coronavirus pandemic.
But here’s the silver lining:
Uncertainty can definitely be uncomfortable but this volatility is not all bad.
In fact, it may also create a lot of high investment opportunities and you can take advantage of these movements by speculating on the price movement not only on stocks but also other financial instruments such as commodities, indices, forex and even cryptocurrencies.
This trading method is called contracts for difference or more popularly known as CFDs.
Here’s a short but very informational video that explains what CFD is:
CFDs also offer the opportunity trade without the need to own the underlying asset since it is a form of derivative calculating the asset’s difference in price when the contract was opened and closed.
Rather than buying a stock at the lowest price possible and waiting for their value to appreciate to make a profit, this is a great alternative that has a lot of advantages including the ability to go long or short.
Do take note:
CFDs are complex instruments and since markets are fast-moving, this comes with a high risk of losing money due to leverage which can expose traders to huge potential profits but potential losses as well.
So if you would like to explore CFD trading while we’re in a kangaroo market then we highly recommend that you sign-up only with a regulated and well-established brokerage firm like Plus500 (click here to read our in-depth review).
You can test out their platform by utilizing their demo account which is already preloaded with virtual credits so you can experience trading on their platform in practice mode. If you wish to sign-up, simply fill-up the form below: