What are bulls and bears?

bulls vs bears definition

A potential downfall for investors in a bull market is a reluctance to sell and take profits. Especially in a prolonged bull market, investors can forget the pain they https://www.bigshotrading.info/ experienced in the last bear market and feel like the bull market will never end. This is perhaps the biggest risk that an investor might face in a bull market.

bulls vs bears definition

Finding stocks that meet your technical criteria is a daunting process to take on with just your eyes and ears. Since there are thousands and thousands of stocks trading each day, a stock market scanner is required for anyone who is serious about day or swing trading. Scanners can look across entire swaths of the market searching for particular signals. Determining whether the current market is a bear or bull is the easy part.

What Do You Mean by Bulls and Bears?

Bull markets generally coincide with periods of robust economic growth; investor confidence is on the rise, employment levels are generally high, and economic production is strong. The term “bull vs. bear” denotes the ensuing trends in stock markets – whether they are appreciating or depreciating in value – and what is the investors’ outlook about the market in general. The bear sold a borrowed stock with a delivery date specified in the future. This was done with the expectation that stock prices would go down and the stock could be bought back at the lower price, with the difference from the selling price kept as profit. This type of selling was used by many people involved in an early eighteenth-century scandal in England known as the South Sea Bubble. While the terms are relatively simple to understand, the impact either a bull or bear market can have on your portfolio and wealth is undeniable.

bulls vs bears definition

The start of this bull market was on the heels of a severe bear market tied to the financial crisis of 2007–08. Market changes, such as in bull and bear bulls vs bears definition markets, can be distressing but can serve as unique opportunities if you have a plan. At times, the market can be volatile, which can play on emotions.

Bull Vs. Bear Market

However, knowing when is the best time to buy and sell is not that simple. Most of the time, investors lose their confidence and exit in the bear market itself by booking losses. But there is a caveat involved; selecting a stock based only on its price during a bear phase, without checking the fundamentals of the company, can be misleading.

bulls vs bears definition

A bull market indicates a sustained increase in price, whereas a bear market denotes sustained periods of downward trending stock prices – typically 20% or more. A bear market refers to a decline in prices, usually for a few months, in a single security or asset, group of securities, or the securities market as a whole. Typically, a move of 20% or more from a recent peak or trough triggers the change to an “official” bear or bull market. In a bull market, there is strong demand and weak supply for securities. In other words, many investors wish to buy securities but few are willing to sell them.

Understanding Bull Markets

Where most people feel really scared or nervous in a bear market, we’re looking to buy  $10 dollar bills for $5 bucks. It’s like going to a flea market and everything is on sale, we get really excited. Others point to Shakespeare’s plays, which make reference to battles involving bulls and bears. Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance.

A bear market exists in an economy that is receding and where most stocks are declining in value. Because the financial markets are greatly influenced by investors’ attitudes, these terms also denote how investors feel about the market and the ensuing economic trends. Bull markets help investors increase their wealth, but can also lead to overconfidence and a mistaken belief that prices will never fall. Investors can sometimes also ignore when stocks get overvalued based on a company’s fundamental outlook, and pay too much for growth prospects. Sometimes the later stages of a bull market feature investors grabbing investments that later prove questionable, like the “meme” stock craze in 2020 or the dot-com bubble of the late 1990s.

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How you should handle a bear market, though, is dependent on your investment timeline. Some market analysts argue for more thoughtful definitions of bull and bear markets that take into account underlying conditions and span a wider period of time. These are sometimes known as “secular” or “structural” bull or bear markets. In addition, investors may benefit from taking a short position in a bear market and profiting from falling prices.

  • Because of this, share prices continue to rise as investors jockey for positions to buy.
  • Market Timing
    Some people believe that by recognizing the different kinds of markets you can make money on stock trading and investing.
  • Investors used many different tools in an attempt to predict the direction of stocks, including market indicators used in technical analysis.
  • They often occur when interest rates are relatively low, geopolitical tensions aren’t too intense, and inflation isn’t hurting peoples’ finances.
  • During your lifetime, you can expect to live through approximately 14 bear markets.
  • How you should handle a bear market, though, is dependent on your investment timeline.

Their lengths varied wildly, with one lasting just six months and another nearly three years. 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. The terms “bear” (for down markets) and “bull” (for up markets) are thought by some to derive from the way in which each animal attacks its opponents. That is, a bull will thrust its horns up into the air, while a bear will swipe down. These actions were then related metaphorically to the movement of a market.

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