What is a Bull Market

Posted in Trading Basics

There are two classic market types used to characterize the general direction of the market. Bull markets are when the market is generally rising, typically the result of a strong economy. A bull market  is typified by generally rising stock prices, high economic growth, and strong investor confidence in the economy. Bear markets  are the opposite. A bear market is typified by falling stock prices, bad economic news, and low investor confidence in the economy.

A bull market  is a financial market where prices of instruments (e.g., stocks ) are, on average, trending higher. The bull market  tends to be associated with rising investor confidence  and expectations of further capital gains .

A market in which prices are rising. A market participant who believes prices will move higher is called a bull. A news item is considered bullish  if it is expected to result in higher prices.An advancing trend in stock prices that usually occurs for a time period of months or years. Bull markets  are generally characterized by high trading volume .

Simply put, bull markets  are movements in the stock market in which prices are rising and the consensus is that prices will continue moving upward. During this time, economic production is high, jobs are plentiful and inflation is low. Bear markets  are the oppositestock prices are falling, and the view is that they will continue falling. The economy will slow down, coupled with a rise in unemployment and inflation.

A key to successful investing  during a bull market  is to take advantage of the rising prices. For most, this means buying securities  early, watching them rise in value and then selling them when they reach a high. However, as simple as it sounds, this practice involves timing the market. Since no one knows exactly when the market will begin its climb or reach its peak, virtually no one can time the market perfectly. Investors often attempt to buy securities as they demonstrate a strong and steady rise and sell them as the market begins a strong move downward.

Portfolios with larger percentages of stocks can work well when the market is moving upward. Investors who believe in watching the market will buy and sell accordingly to change their portfolios.Speculators and risk-takers can fare relatively well in bull markets. They believe they can make profits from rising prices, so they buy stocks, options, futures and currencies they believe will gain value. Growth is what most bull investors seek.

What is a Bear Market?

The opposite of a bull market is a bear market  when prices are falling in a financial market for a prolonged period of time. A bear market tends to be accompanied by widespread pessimism.A bear market is slang for when stock prices have decreased for an extended period of time.  If an investor is bearish they are referred to as a bear because they believe a particular company, industry, sector, or market in general is going to go down.