Bull Market vs. Bear Market

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Bulls thrust their horns up into the air while confronting its foe, in the same manner, when the market is moving upward aggressively, it is known as a bull market. On one hand, bears swipe their paws downwards against its opponent, similarly, when the market plunges, it is said to be a bear market.

The terms bulls and bears are being used in the stock market to indicate how the market is doing at a particular time. For the beginner investors, these terms may appear a bit confusing, but one can easily get the meaning of the two by analyzing the way these animals attack their opponents, which depicts the market movement.

See also Breaking the Stock Market Myths

Bull Market Defined

The bull market is referred to as a marketplace, wherein the prices of the securities rise or are expected to rise, over the period. In this type of market, the act of buying is encouraged due to the favorability of the conditions. The basic components of a bull market are optimism, higher returns, high stock trading, and investor confidence. Additionally, predicting the market trends can be quite challenging. For instance, the time when the trend will change.

Investors who anticipate the prices to go higher are called bulls, and the sentiment is known as bullish.

Bear and Bull Markets

Bear Market Defined

When the market displays trends with a consistent fall in the prices of securities, this is called a bear market. In this type of market, pessimism is frequent, and the investors take a short position. Securities are being sold by the investors due to the expectation of loss by holding them. The bear market is characterized by declining of stock trading, low returns, low investor confidence, and often goes along with the recession in the economy.

Bull and Bear Markets History

Compared to a bear market, the bull market usually can last much longer and possess greater returns. This is due to the fact that the bear market is very short and critical, which make it improbable to get out in time consistently. In some cases, the moment investors realize they are in a bear market and begin to get anxious, they are probably near to the start of a bull market.

Things To Do…

When you are in a bull market, you should take advantage of the increasing prices by buying early and then selling later when the prices have touched their highest high. While the market is bullish, you can invest in more equity with a higher possibility of generating returns.

When you are in a bear market, on the other hand, your chances of loss are bigger due to the continuous losing value of prices. You are better off short selling or making safer investments, such as fixed-income securities.

See also Who Controls the Stock Market

Conclusion

Whether you are in a bull market or bear one, it is always important that you know what to do and be prepared with the possible repercussions of your choice.

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