What is a Bull and a Bear Market?

In stock trading and investing there are bulls and bears. It sounds dangerous but it isn’t. You often hear of the market being bullish or bearish. So what is the definition of a bull market and what is a bear market?

A Bull Market
This is when the market is showing confidence. Indicators of confidence are prices going up, market indices like the NASDAQ go up too. Number of shares traded is also high and even the number of companies entering the stock market show that the market is confident.

These are bullish characteristics. If there is a run of bullish days then you may hear the market is a bull market. Technically though a bull market is a rise in value of the market of at least 20%. The huge rise of the Dow and NASDAQ during the tech boom is a good example of a bull market.

A Bear Market
A bear market is the opposite to a bull. If the markets fall by more than 20% then we have entered a bear market. A bear market is a market showing a lack of confidence. Prices hover at the same price then go down, indices fall too and volumes are stagnant. In a bear market people are waiting for the bulls to start driving the prices up again. However, a bear is a very tentative bull or a bull that is asleep.

Market Timing
Some people believe that by recognizing the different kinds of markets you can make money on stock trading and investing. The basic idea behind buying stocks is to buy low and sell high. This will give you a profit. So to make money you buy stocks in a bear market when stock prices are low and sell stocks in a bull market when stock prices are high. However, knowing when is the best time to buy and sell is not that simple.

Unfortunately, most investors are often too emotional and they sell in a bear market because they are scared to lose money and they buy in a bull market because they don’t want to miss the big gains. You can make some money that way but it also explains why many investors lose money by trying to time the market. The safest way to help prevent yourself from making these mistakes is to buy stocks and invest in the market by regularly making fixed size investments, and holding your investments for a long period of time.

 

For teaching and learning about investing:

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All about investing and money management. Learn basic investing and financial concepts, including stocks, the stock market, interest, income statements. Lessons, lesson plans, and worksheets.

 

Information is for educational and informational purposes only and is not be interpreted as financial advice. This does not represent a recommendation to buy, sell, or hold any security. Please consult your financial advisor.



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One Response to What is a Bull and a Bear Market?

  1. Robert Jones says:

    Hey thanks for writing up the differences on bull and bear markets, I really think free stock tips like this really help new investors like myself see the bigger picture. Keep up the good work!

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