Trading Terms Explained – From Bullish And Bearish, To Dovish And Hawkish

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Options Broker 2020!
    Perfect For Beginners!
    Free Demo Account!
    Free Trading Education!

  • Binomo
    Binomo

    Good choice for experienced traders!

What is Dovish and Hawkish in Forex?

What is Dovish and Hawkish in Forex?

Beginner traders may still be unfamiliar with the two terms above and are confused about what dovish and hawkish mean. Both of these terms are closely related to each other and need to be well understood by traders.

In this discussion, we will explain to you all about the complete Dovish and Hawkish terms.

Let’s look at the explanation below.

What is Dovish?

Dovish is a word derived from the English word dove, meaning dove in Indonesian. If you pay attention to the nature of the dove where it will always be careful and always fly low as if afraid of heights.

The nature of the dove gives understanding to dovish, which means making decisions more carefully and not taking high risks. Dovish can also be said to be away for a person to see the conditions that exist in the economy and are often used in decision making by the Central Bank regarding interest rates.

The Central Bank often holds important meetings to talk about economic movements and see whether they are still related to the current financial condition or not. Economic policies issued by the Central Bank will greatly affect the interest of forex traders to make transactions in buying and selling currencies.

Thus we can mean that dovish is a way of looking at the Central Bank with regard to changes in interest rates and also the perspective of traders when estimating future currency weakness.

The Central Bank will start issuing a dovish policy when they see a slowdown in economic growth and this is marked by a decline in inflation. Dovish has the nature of being prudent and not aggressive in making decisions on ongoing economic events.

An example of a case related to Dovish is what has happened to the Central Bank of Australia (RBA). Whereas at that time RBS said that the interest rate target would be at 1.75% and when they said this the interest rate was still in the range of 2.5%.

What Is Hawkish

Then there is a hawkish term whose meaning is very contrary to the above definition. Hawkish comes from the word hawk which means eagle in Indonesian. The nature of eagles is firm and always flies very high and is contrary to the nature of a dove.

So hawkish is an aggressive perspective when you are going to make decisions about an ongoing event. In its application hawkish is often used to make decisions at the Central Bank with regard to economic movements related to interest rates.

Dovish gives an indication of a decline in currencies, while hawkish leads to an increase in inflation rates. When the Central Bank sees inflation rising high, now they need to issue a hawkish argument.

When the above actions are taken, the consequences are able to reduce the inflation rate by increasing interest rates or reducing stimulus.

Examples of cases related to hawkish are when there are comments from the Fed, where they always say they will immediately increase interest rates. This hawkish comment issued by the Fed will attract people to buy USD and then be able to make the USD strengthen.

Conclusion About Dovish and Hawkish

Currency movements in the world depend heavily on economic policies carried out by the Central Bank. So it is very natural that the central banks of each country always hold meetings regularly to discuss whether economic policies are still relevant or not with the current situation. Thus, it is natural that economic policies always change over time.

When changes in economic policy, this will greatly affect the attractiveness of buying or selling the currency. This is where traders start looking for profits by predicting whether the currency will weaken or strengthen in the future.

The problem is that the meetings conducted by the Central Bank are not the same as data such as inflation or GDP which are numbers and can be read easily. Meetings held by the Central Bank are statements and they rarely mention exact figures.

Because of the above, investors and traders provide categories of statements issued by the Central Bank to Hawkish and Dovish.

With your ability to understand the interest rate policy of the currency being traded, this can increase the chances of getting a bigger profit. Although there are still other factors that will affect the rising and falling currencies, the changes in interest rates that occur are very important to understand.

The difference between hawkish and dovish is very simple and easy to distinguish. Where dovish leads to lower interest rates and has a more careful brush and will get a negative response from traders.

On the other hand, hawkish leads to more positive conditions and this can be known by an increase in interest rates and will usually get a positive response from traders.

Such is the Dovish and Hawkish explanation that we can convey regarding hawkish and also dovish. Hopefully, the information above can help you distinguish between the two terms.

Bullish and Bearish market..Meaning

Тему создал/а Redfa, December 18, 2020 in Trading

Рекомендуемые сообщения

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Recently Browsing 0 members

No registered users viewing this page.

Популярное сейчас

Best crypto currency to invest in 2020 1 2 3 4 43

Тему создал/а Sedy, January 22 in Crypto World

  • 1 062 ответа
  • 13 386 views
  • Igoryc777
  • Just now

By Sedy
Создано January 22

By cryptoya11
Создано Saturday at 19:55

Bullish and Bearish Option Trading Strategies

If you’re interested in trading options, you’ll find that the markets can be responsive and dynamic. Trading with Ally Invest provides insights and tools that can help you find appropriate option trades for just about any market outlook or environment. These trading environments can be categorized as bearish, bullish, neutral, or volatile. Each has its own trading strategies; we’ve provided examples of bullish and bearish strategies below.

Bullish Option Strategies

Bullish strategies are used when you forecast an increase in a security’s price. This security may be referred to as the underlying or simply the stock. The basic concept behind bullish options strategies is for these trades to result in a gain if the trader’s forecast of the underlying is correct. If your projections did not come to fruition in the prescribed time, the option trade may result in a loss.

Buying a Call Option

A call option provides you with the right to buy the underlying shares (usually 100 per contract) at a pre-negotiated price on or before a specific date. If the stock increases in price, the call option’s price may increase as well, allowing you to profit. If the call option’s price increases above the amount paid, you’ll realize a profit. However, it is possible for the call option to lose value and you would incur a loss. Too much time may have passed or there may have been a decline in the corresponding equity’s price. If this happens, you may lose a portion of or the entire amount of the call option’s value.

Buying a Protective Put

If an online stock trader owns or is long 100 shares of a stock, the trader may decide to protect this investment during times of market uncertainty or increased market volatility. If the online trader’s longer term outlook is bullish, one option trading strategy to consider would be to buy a put option online in order to hedge or protect the long stock position. The buyer of the put option obtains the right to sell the individual equity shares (usually 100 per contract) at a predetermined price on or before a certain date. This means if the stock declines in value, the put buyer has the right to sell the shares potentially for an amount higher than the current stock price. The put option acts like a home insurance policy. You hope you never need to use it, but it’s nice to know you have it. This comes at a price, known as the option premium. Even though the asset is now “insured” there is no limit to the upside profitability of the stock if the stock increases by more than the cost of the put option. If the stock stagnates or only increases slightly, the purchase of the put option may not have been necessary in hindsight. The trader may incur a loss on the put trade.

Bearish Option Strategies

If you foresee a decline in a stock’s value, you’ll likely employ a bearish options trading strategy that will take advantage of a decrease in the underlying asset’s price. This may cause the strategy to realize a gain. If your forecast is incorrect, the option strategy could net a trading loss.

The first bearish strategy most online traders learn is how to sell a stock short online. This is profitable if the stock declines in price lower than your sell short price. You would buy back the shares that you are short and close out the short stock position. If the stock increases in price, you will incur incremental losses as the stock rises in price. Because there is no limit on how high a stock may rise, short selling may result in unlimited losses.

Buying a Put Option

If you have the same market outlook as a short seller but wish to employ a trading strategy with lower and predefined risks, you can purchase a put option. Unlike the Protective Put strategy, you do not own the underlying stock.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Options Broker 2020!
    Perfect For Beginners!
    Free Demo Account!
    Free Trading Education!

  • Binomo
    Binomo

    Good choice for experienced traders!

As the buyer of a put option, you have the right to sell shares of the stock (usually 100 per contract) at a fixed price on or before the expiration of the put option contract. If the stock decreases, the put option may become more valuable as the stock trades lower and lower in price. This increase in the put option’s value allows you to sell the put option for more than you paid, netting a profit.

Trades don’t always turn out as planned and the same is true for buying put options. This bearish trading strategy may lose money if the put price declines in value. One reason this may occur is if the stock movement is opposite to your forecast and actually increases. Another reason could be that too much time has passed. However, your loss is limited to the cost paid for the put option.

Options trading strategies aren’t all black and white – there are numerous shades of gray when it comes to identifying a suitable approach. Different trading scenarios will require a different approach to investment.

Market neutral option trading strategies attempt to take advantage of a stock that is expected to be range bound or stagnant in price over a period of time. Although any price movement is possible, it’s unlikely that a stock will move severely in either direction during orderly trading conditions.

You may foresee increased volatility in a certain stock. That’s when your strategy should maximize exposure to increased implied volatility in options. Increases in implied volatility infer that the stock has a greater propensity to move either up or down. Use certain strategies to make a profit if the stock makes an extreme price move. If the stock stagnates or implied volatility decreases, you may incur a loss.

Ally Invest has a flexible and customizable options trading platform, designed to improve your experience. We’ll help you research the underlying stocks and provide access to invaluable market data and statistics, which play a fundamental role in deciding on a trading strategy.

This icon indicates a link to a third party website not operated by Ally Bank or Ally. We are not responsible for the products, services or information you may find or provide there. Also, you should read and understand how that site’s privacy policy, level of security and terms and conditions may impact you.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Options Broker 2020!
    Perfect For Beginners!
    Free Demo Account!
    Free Trading Education!

  • Binomo
    Binomo

    Good choice for experienced traders!

Like this post? Please share to your friends:
How To Make Money on Binary Options Trading
Leave a Reply

;-) :| :x :twisted: :smile: :shock: :sad: :roll: :razz: :oops: :o :mrgreen: :lol: :idea: :grin: :evil: :cry: :cool: :arrow: :???: :?: :!: