Bull and Bear Market

Understanding the Difference Between Bull and Bear Market

Whether you are new to crypto investment or not, it is smartoptions that you fully understand the market. Every day, you encounter the terms “bull” and “bear”. These are not simply animals. In the investing world, these are the terms describing the market conditions. You already know that the direction of the market is a critical force affecting a portfolio.

It is important that you know what these terms signify so you will know how it affects you and your portfolio. Here are some things that you should know about market conditions:

What is a bull market?

A market that is going up aggressively over a period of time is called the bull market. Investors believe that the trend will continue long term. In this market condition, the country’s economy is strong with high employment levels.

What is a bear market?

A market that is going down over a period of time is called a bear market. You will see that the share prices are continuously dropping. When this happens, the people start to get scared about putting money in the stock market. In this market condition, the economy slows down and the unemployment will rise.

bear markets
Bull versus bear markets

You need to remember that bull market is portrayed by optimism and positive growth, which catalyse greed. The bear market is linked with the decline, which instills fear. As investors, it is smart options that you know the accompanying characteristics of the market condition. The characteristics include supply and demand for securities, investor psychology and change in economic activity.

How to gauge market changes?

You can gauge the market changes based on its long-term performance. Small movements only show a short-term trend or even market correction. A longer time period will define whether it is a bull or bear market.

What you can do about it?

It is important that you know what to do depending on the market condition. In a bull market, investors need to take advantage of the rising prices. They do this by securing stock early in the trend and sell it after reaching its peak. In this condition, investors can confidently invest. If there are losses, it will be temporary and minor.

In a bear market, the risk of losing is greater because the prices continue to lose value. Even if you invest hoping for an upturn, you will likely face losses before any turnaround. In this condition, you can get the most profitability in short selling fixed-income securities.

You already know that there is no sure way of predicting market trends. As an investor, it is prudent to invest based on the quality of the investment. Bull and bear markets will largely influence your investment so it is smart options to determine what the market is doing before making an investment decision.