A Song of Bulls and Bears

In a land very far away, there is a divided kingdom called the Market. Always ongoing in the country is a civil war between the North and the South. The Northerners are known as the Bears, and the Southerners the Bulls. A horizontal border separates the two sides, and it is known as the Price. Every day, the Bears try to push the Price south, and the Bulls want it to go north. As a result, the Price keeps going up and down every day.

To measure the progress of the battle, they use a particular latitude unit called the Dollar. An increase in the Dollar number indicates that the Price has gone north, and vice versa. Say, the Price was at $10 yesterday. If today it goes up to $11, it means that the Bulls have won the battle today, and gained $1 worth of territory. If tomorrow it goes back down to $10, then it means the Bears fights back and regains the lost ground.

In addition to the movement of the Price, the militants also measure other things on the battlefield. For instance, they pay a lot of attention to the number of soldiers died every day. However, instead of referring to it directly as casualties, they prefer the euphemism “Volume”. When they say the Volume is low today, it means the number of victims is small, indicating that there is not much fighting going on. However, if the Volume is high, then it means there is a major battle, and the outcome usually decides the short-term direction of the Price.

Both sides build strongholds and outposts on the battlefield. A defence line of the Bull side is called a Support, and that of the Bears is known as a Resistance. When the Price approaches a Resistance from the south, there is usually a substantial friction to go north further despite a higher Volume, and it often pushes the price back south. On the other hand, when the Price falls to a Support level, the Bulls usually show a great determination to push the Price back north again.

For most of the time, the conflict in the Market is a close battle. The two sides fight back and forth between a Support and a Resistance, and the Price does not change much. If you plot the change of Price against time on a graph, you can see that it remains in a directionless range, and this is why people call it a Sideways Period or Ranging Period. During such period, the Volume is usually quiet except when the Price bounces back from the Support or turns away from the Resistance.

However, there are also times when one side clearly has the upper hand. When the Bulls overcome the Bears, people call it a Bull Market. One can see that the Price keep making higher tops and higher bottoms on a graph, indicating that the Bulls are advancing and the Bears are retreating. The reverse is known as a Bear Market, where the Price displays a clear trend of going south.