What Are Bull and Bear Markets – A Stock Market Concept Explainer

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Stock Market
Stock Market

Investors can look at the bulls and the bears from different views concerning profitability. You can keep investing in both phases of the market using techniques and make profits. Let us understand bull and bear markets.

Bullish Market

It is the phase of the stock market when the market is going in an upward direction and is considered prosperous. A bull market can be defined as a market condition when stock prices rise 20% after two successive 20% drops. It indicates rising asset prices. Typically, it is the series of time frames when asset price increases for a prolonged period – for months or years.

The bullish sentiment means most investors believe that stock prices will increase. A bullish investor also called a bull, assumes that a particular asset price or market will go up. Understand the opportunities available in the market and be ready with your demat account to grab them. Investors find the overall stock market bullish, expecting high revenues from companies.

Bull Market Attributes

  • Market shifts to bull when most investors are optimistic. It witnesses a rise in IPO activities.
  • Bull market rallies with lower interest rates, high revenue of companies, and when inflation expedites.
  • A bull market means a sufficiently strong economy. Bulls result in a rise in the employment graph in the country.
  • Historically, bull markets are more powerful and last longer than bear markets.

Investors can enjoy regular and increased corporate profits. Most of the time, the stock markets remain bullish. You need to open demat account along with trading account with a stockbroker to start investing in the stock market.

Demat Account vs Trading Account: A demat account is a repository for your financial assets to be stored and traded electronically, and a trading account is an account that connects you to the broker’s trading platform and allows you to place trade orders on stock exchanges online.

How to Benefit from a Bull Market

  • Purchase and Hold: During a bullish market, more investors look to buy than sell. Stocks perform well and rise high over time during a bull market. Long-term investors can take the most advantage as they tend to hold stocks for years.
  • Short-term Trading: Short-term traders believe that the stocks will go up in minutes, days, or even weeks. Active traders analyze price charts and invest in a company. They look at corporate announcements, like quarterly earnings and profits on their trades.

Bearish Market

A bear market expresses a market phase with plunging stock prices. Bear markets decline the index values such as the SENSEX and NIFTY. Bear markets can sustain for a few or several weeks. It can result in a market crash if it lasts for many years. When the market declines 20% or more within two months, it is called a bear market.

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The bearish sentiment means a large group of investors believe that prices will decrease. Investor sentiment, other than economic cycles, is the crucial driver of bear markets. A bearish investor, or a bear, can be bearish about a specific financial asset or industry or the market as a whole.

Bear Market Attributes

  • It is the phase when the market is going through wide pessimism among investors.
  • During bears, the market sees a lower level of demand for securities and thus, stock prices decrease more.
  • Bearish markets go along with the economic slowdown. In this phase, the rate of unemployment increases rapidly.
  • Bears do not usually fall as easily as bulls go up.

What To Do in Bear Market

Every trader loves to trade in the bullish market, but they need to adapt to the bearish markets as well. Traders need to be flexible. An experienced investor can use many techniques to invest in a bear market and benefit from the bears.

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  • Bearish traders look to take short positions to make a profit if the market is about to decline.
  • In weak markets, traders consider short selling.

Thus, understand these markets and invest or trade for significant returns. Let us close the post with the interesting fact – how the market phases got these names. The market phases got the names based on the real assault techniques of animals. Bulls hit their horns upside while attacking, whereas bears hit their claws downside.

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