Bull and Bear market
- Bull and bear markets are lingo expressions that made it to the mainstream
- Bull market is when prices go up
- Bear market is when prices go down
Bull market - When a bull strikes, it thrusts its horns up. Similarly with the stock market, a bull market is defined as a period of time when prices are rising and expected to continue rising. Characterized by optimism and investor confidence, this period can last from anywhere between a few months to a few years. Note that a bull market can refer to more than just the stock market but also the bond, real estate or commodities market. A period can be said to be a “bull market” if stocks rise by 20% after two declines of 20% each. In order to gain the most benefit from a bull market, an investor should enter a position early in order to take advantage of rising prices and exit their position when the asset has reached a peak.
Bear market - On the other hand, when a bear strikes, it swipes its paws down. Contrary to a bull market, a bear market is defined as a period of time when prices are falling and expected to continue falling. Characterized by pessimism and investor fear, this period can also last from anywhere between a few months to a few years. Similarly, a bull market can refer to more than just the stock market. In order to take advantage of falling prices, investors can use alternative strategies such as put options (explained later) to benefit from an asset’s falling price.