Mass Psychology On The Street

Four animals are mentioned often on Wall Street: bulls and bears, hogs and sheep. Traders say: "Bulls make money, bears make mony, but hogs get slaughered."

A bull fights by striking up with his horns. A bull is a buyer - a person who bets on a rally and profits from a rise in prices. A bear fights by striking down with his paws. A bear is a seller - a person who bets on a decline and profits from a fall in prices.

Hogs are greedy. They get slaughtered when they trade to satisfy their greed. Some hogs buy or sell positions that are too large for them and get detroyed by a small adverse move. Other hogs overstay their positions - they keep waiting for profits to get bigger even after the trend reverses.

Sheep are passive and fearful followers of trends, tips, and gurus. They sometimes put on a bull's horns or a bearskin and try to swagger. You recognize them by their pitiful bleating when the market becomes volatile.

Whenever the market is open, bulls are buying, bears are selling, hogs and sheep get trampled underfoot, and the undecided traders wait on the sidelines.

- By Alexander Elder "Trading For A Living"