A BULL OR BEAR MARKET EXPLAINED
Think of the greatest rivalries that are out there? There are a few that will immediately pop up:
- Coke and Pepsi
- Tupac and Biggie
However, one of the favorite rivalries in the financial world has to be The bull Vs. The bear and this is not one of those sadistic YouTube videos that have two animals battling to the death.
The bull versus the bear in the finance world implies on the investment trends that have the capacity to power and significantly impact the global financial market. You have definitely heard this financial word thrown out here and there and probably did not make much of it, but what does it mean? How is it able to affect you and your investments?
A Bull Market
What this means in financial terms is a market that is showing confidence, and in this case, it is when the prices are plummeting. Marketing indices such as the NASDAQ will go up too. In effect, the number of shares will also rise, meaning the number of companies that will be entering the stock market will reveal that the specific market is confident. This is what is determined as bullish characteristics of the market.
In case there is a run of the bullish days, then you will likely hear the market is termed as a bull market. In technical terms, a bull market is a rise in the value of the market by at least 20%. An excellent example of a bullish market is the significant rise of the NASDAQ and Dow during the tech boom.
A Bear Market
Ideally, the bear market is the opposite of the bull market, meaning that in case the markets fall by more than 20% then, we will have entered a bear market. The bear market is simply a market that is showing some lack of confidence. Some of the symptoms are prices hover at the same point before going down, the volumes are stagnant, and the indices fall. When there is a bear market, people are always waiting or looking forward to the bulls to start driving up the prices again. What you need to know is, a bear is a tentative bull, or rather a bull that is asleep.
There is an assumption that being able to distinguish these two markets will ultimately help you make money in investing and stock trading. The general idea in stock trading is that you buy low and sell high; meaning you will be able to secure a profit.
Therefore, to make a profit, a stock trader will have to buy stocks during a bear market when stocks are low in value (bear market) and sell them later when the stock prices are higher in a bull market. The challenge often comes in determining the best time to buy or sell your stocks— it’s not as simple as you might think.
The complexity of the stockbroking often arises because most investors get emotional when they sell their stocks in a bear market since they are scared of losing money. They will rush to buy in a bull market since they are afraid of losing out on the opportunity to make significant gains.
It’s possible to make money this way. However, it explains why investors will lose money by being fixated on timing the market. It is advisable that to help yourself from falling into these pitfalls; you need to buy stocks and invest in the market regularly, making fixed size investments and holding the specific investments for an extended period.