Bull Market Vs Bear Market Definitions & Strategy

Simply stated, a bull market occurs when investors show enthusiasm for buying stocks or other assets, while a bear market indicates investors are shying away from buying and looking to sell. The definitive explanation for how these terms came into existence may be lost to the dust heaps of history, though some popular theories linger about how they emerged. This may come as a surprise to you, but money can be made in both a bull vs bear market.

bull vs bear trading

In a bull market, unemployment rates are declining amid a more robust economy and better purchasing power among consumers. During bear markets, however, companies tend to lower employee headcounts, driving unemployment Forex platform rates up. This also tends to prolong a bear market since people are earning less, companies are also earning less revenue. With cryptocurrency, however, trends differ due to crypto’s susceptibility to fluctuations.

The Difference Between Bull Vs Bear Markets

BearishBearish market refers to an opinion where the stock market is likely to go down or correct shortly. It is predicted in consideration of events that are happening or are bound to happen which would drag down the prices of the stocks in the market. A bull, with its squat legs and sharp horns, attacks by swinging its head upwards, like the upward swing of the economy in bull market years.

Falling interest rates have been a boon to the stock market for decades now and easy fiscal policy in 2020 resulted in many Americans putting record amounts of capital into stocks. Investors’ psychology and stock market performance are also mutually dependent. In a bull market, the increase in stock market prices boosts investor confidence, which causes investors to put their money in the market in the hope of obtaining a profit. As we discussed, the cryptocurrency market has fewer investors and is more volatile than the stock market, so there are a few differences when considering trading during bullish and bearish markets.

An hour later, she buys 100 shares back for $9.60 per share at a total cost of $960. Since she initially received $1,000, buying the shares back for only $960 gives her a $40 profit. However, if the price moves up to $10.50, she has lost $50 ($0.50 extra cost x 100 shares).

Best Stocks Under $5

This move is followed by a subsequent correction and more buying until surpassing of the initial peak confirms an upward trend. In the second stage, which is often the longest and largest, business conditions, earnings and stock prices improve. This builds investor confidence and encourages a broader portion of the public to participate in the market. In the final stage, there is excessive speculation and inflationary pressures begin to appear, signalling a downturn in the market is not far off. If you’re a true long-term investor, you shouldn’t really be too concerned with whether you are in a bull market or a bear market.

The use of ‘bull’ and ‘bear’ to portray market conditions stems from the way these animals attack others. If you try to time the market by buying and selling when things get bumpy, you may miss some of the best returns. Most people refer to a bull market as a period where a particular index, such as the S&P 500, has grown by 20% following a prior decline of 20% or more.

bull vs bear trading

Although both are marked largely by the direction of cryptocurrency prices, there are key differences that investors can take note of. The effect that bull and bear market trends have on cryptocurrency is generally the same as that of stocks. There is no specific and universal metric used to identify a bull market. Nonetheless, perhaps the most common definition of a bull market is a situation in which stock prices rise by 20%, usually after a drop of 20% and before a second 20% decline. Since bull markets are difficult to predict, analysts can typically only recognize this phenomenon after it has happened. A notable bull market in recent history was the period between 2003 and 2007.

Bull Vs Bear

Bear markets almost never last as long as bull markets and can create buying opportunities for investors. In a bull market, stocks show a tendency to go up in price over a period of time. Typically, the average length of a bull market is approximately 97 months. Bull markets are most common when the economy is growing, unemployment is low and inflation is somewhat tame.

  • In a bull market, unemployment rates are declining amid a more robust economy and better purchasing power among consumers.
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  • The terms bear market and stock market correction are often used interchangeably, but they refer to two different magnitudes of negative performance.
  • Likewise, changes in markets are indicated by substantial swings (at least 20%) in either direction.

As such, bear markets typically accompany economic recessions, with GDP decreasing for two consecutive quarters. In a bear market, however, more people are selling than buying . During a bear market, the economy is slow with high unemployment rates. These conditions can arise from poor economic policies, geopolitical crises, burst market bubbles and even natural disasters.

Characteristics Of A Crypto Bull Market

It might be said that the prevailing sentiment of participants in a bull market is greed or fear of missing out. Is a short-term loan from a bank, credit card company, payday lender, or other type of lender, typically with a high-interest rate or hefty fees. You’ll also hear the term “short-selling.” This is also called shorting. The term “bull” or “bullish” comes from the bull, who strikes upward with his horns, thus pushing prices higher. As an example, suppose Suzy goes long 100 shares of ZYZY stock at $10.00, costing her $1,000. Several hours later, she sells the stock for $10.40 per share, collecting $1,040 and making a $40 profit.

What Defines A Bear Market?

Stocks under $20 can offer investors and short-term traders a viable choice as long as you do research to pick the right ones. Prominent options traders get high-quality execution, real-time market data and subscription trading. Public puts investors first and doesn’t sell trades to market makers or take money from Payment for Order Flow . Finding stocks that meet your technical criteria is a daunting process to take on with just your eyes and ears.

The worst of them saw an 83% drop in the S&P 500, while the other end of the spectrum represented a 21.8% drop. In financial markets, “hawkish vs. dovish” typically refers to opposing approaches toward interest rates and Federal Reserve monetary policy. A hawk, or someone who’s “hawkish,” probably favors keeping benchmark short-term interest rates relatively high and the money supply relatively “tight” to keep inflation down. The usual cause of a bear market is investor fear or uncertainty, but there are a multitude of possible causes. However, the term bear market can be used to refer to any stock index, or to an individual stock that has fallen 20% or more from recent highs. For example, we could say that the Nasdaq Composite plunged into a bear market during the bursting of the dot-com bubble in 1999 and 2000.

Characteristics Of Crypto Bear Markets

Click here for our live trading room where we discuss bull vs bear markets and how to trade them. When you’re ready to pick your specific investments, Fidelity has a wide range of low-cost options to choose from. They even offer $0 commissions on stocks and ETFs as well as some index mutual funds with zero expense ratios. bull vs bear market difference Keeping your investing costs low allows you to further grow your investments through compounding returns. Betterment can help you figure out your risk tolerance and find a suitable portfolio for you to invest in. They also take care of other tasks such as rebalancing your portfolio as needed and tax loss harvesting.

What Meakes Stock Prices Rise In A Bull Market?

And as you no doubt know already, even in an upward trend some markets tend to pull back and then retrace. Similar moves can happen on a downtrend when some markets can bounce back up before dropping lower again. While that may sound simple enough and the only obvious thing to do, the reality may be different for many traders. It’s like using a driver instead of a putter when you’re trying to get the golf ball in the hole when you are on the green. Some of these patterns include bullish and bearish triangles, wedges, cup and handle, double top, double bottom and quasimodo. Every day, the financial experts at Benzinga identify the best stocks to buy now under $5.

Among these are a strong gross domestic product and low unemployment rates. Generally, favorable market conditions cause an increase in investors’ confidence. Cryptocurrency Currency Risk bull markets are, likewise, influenced by similar factors to traditional markets. Briefly put, the investor starts bull markets through the purchase of securities.

Specifically, if it is gaining value, or moving up , or losing value because its movement is going down or declining in value . Benzinga takes an in-depth look at the best stock market apps for 2021. Benzinga breaks down how to sell stock, including factors to consider before you sell your shares. Our guide to the best stocks under $100 will help you invest without breaking the bank.

The average length of a bear market is just 289 days, or just under 10 months. A bear market is when stock prices on major market indexes, like the S&P 500 or Dow Jones industrial average, fall by at least 20% from a recent high. This is in contrast to a correction, which is a fall of at least 10% and tends to be much shorter lived. But when they do, the bear market results in an average decline of 32.5% from the market’s most recent high.

Being long, or buying, is a bullish action for a trader to take. Put simply, being a bull or having a bullish attitude stems from a belief that an asset will rise in value. To say “he’s bullish ongold,” for example, means that he believes the price of gold will rise.

Author: Dan Blystone

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