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Bull Markets vs Bear Markets
Written by: PaxForex analytics dept - Saturday, 10 September 2016 0 comments
The terms "bull market" and "bear market" describe upward and downward market trends, respectively. The names perhaps correspond to the fact that a bull attacks by lifting its horns upward, while a bear strikes with its claws in a downward motion. A market trend is a perceived tendency of financial markets to move in a particular direction over time. These trends are classified as secular for long time frames, primary for medium time frames, and secondary for short time frames.
A bull market is a financial market of a group of securities in which prices are rising or are expected to rise. The term "bull market" is most often used to refer to the stock market but can be applied to anything that is traded, such as bonds, currencies and commodities. Bull markets are characterized by optimism, investor confidence and expectations that strong results should continue.
A bear market is when the economy is bad, recession is looming and stock prices are falling. Bear markets make it tough for investors to pick profitable stocks. 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.
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. 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.
There is no sure way to predict market trends, so investors should invest their money based on the quality of the investments. At the same time, however, you should have an understanding of long-term market trends from a historical perspective. Because both bear and bull markets will have a large influence over your investments, do take the time to determine what the market is doing when you are making an investment decision.