Let’s be honest here, financial lingo makes little sense and is seemingly meaningless for novice Traders. Yet, they speak of the words as vital ingredients to the conversation. Before you know it, you’d be scratching your head trying to figure what bulls and bears have anything to do with each other — let alone to the financial market. You too, need to deeply understand these lingos to better survive in the market. Just these two words alone, bear and bull, can help you a lot in putting a finger onto where the market might lead. They can also help you determine when is the best time to either buy or sell your assets. Stick around to know everything about bullish and bearish market as well as how to make the best of them.
First thing first, what is a bull market?
We use the term bull and bear market to imply the condition of a market. Typically signified by its appreciation or depreciation, it is determined by how investors react to a financial occurrence. Likewise, the term itself may spark fire on the general investors’ attitudes.
If you ever heard that the market is currently bullish, then ease yourself because you’re finding yourself in the perfect spot of your journey. Bull market means that your market is rising, the economy is doing superb, GDP is high, and unemployment is practically so out on the horizon. A bull market typically implies sustainable increase in market share with investors’ confidence in the long-term performance is boasting.
Okay, what about a bear market?
If you ever heard that the market is going bearish, it means that the market is depreciating. Share prices are consistently lowering, economy is falling, GDP is low, and unemployment rate is higher than usual because most companies would start to cut off their number of workers. Our suggestion? Don’t panic, assess. Like we’ve elaborated earlier, how investors react to the market really plays a huge part in the market itself. Market always moves in cycle, so you need to understand how big the impact might turn out with this bear market. Most investors will just sell their assets and keep their money until the market recovers again as it is harder to invest in bear market.
Does bear market typically take longer than bull market?
Thankfully, no! Even though it is typically severe, bear market usually doesn’t last as long as bull market does. In fact, in most cases, investors wouldn’t realize that a market is bear until almost the beginning of another bull market.
What makes a market bull or bear?
Mainly it is affected by the direction of certain assets’ price, but it will do us no justice to simplify this phenomenon that simply. A market goes bear or bull depending on several aspects such as supply and demand, investors’ attitude, and change in economic activities. For starters, let’s talk about supply and demand for securities. When a market is bull, demand for security will rapidly rise while supply lowers. In result, prices will also rise because investors compete for available equity. When the market is bear, it goes the exact opposite. More people are eager to sell, thus resulting in dropping prices.
Next aspect is investors’ attitude and their state of mind. Like we’ve stated, the market is directed based on the investors’ reaction and vice versa, so it is, in its essential, mutually dependent. In bear market, investors are more hopeful to reap profit as much as possible, meanwhile in a bull market, market sentiment is rather negative, thus convincing people to move their money out of securities. It’s a little complicated but just picture it like a sensitive passive-aggressive, a little bit toxic, relationship.
Another factor is how the economy changes from time to time. For instance, when the economy is rising, people are willing to spend more than they usually do, thus making great impacts and may result in bull market. On the opposite, when the economy falls, people are more hesitant to spend their money — businesses are unable to reap profit because consumers are not as consumptive which then result in dropping prices.
How can you tell if a market is bull or bear?
You don’t just tell the state of the market from its sudden reaction, another thing that might help is to see their long-term performance. If you think the movement is rather slow, it might just be a temporary correction. The long movement is more reliable to pinpoint if a market is bull or bear.
Should I buy in bull or bear market?
Both have their own temptation. Bear market offers cheap prices to buy but you will most likely experience losses before, or if, the market recovers. The advantage? You will reap more tremendously just as long as you have enough patience. Is it the preferable option? If you invest in the right time before the price rises, yes, but the same applies to bull market. The idea is to sell the assets with higher prices than when you buy it. So, really the peak of a bull market is the best time to sell.
In conclusion, both bear and bull market will have large impacts on how your portfolio turn out to be. By knowing all the essence of bear and bull market, you can better develop your trading behavior and make better decisions on sensitive time and market.