What Is A Bear Market? & What Is A Bull Market?

What Is A Bear Market?

A Bull market is a particular financial market where prices are not stable but are constantly rising. It is mainly a merger of securities and fees, likely to showcase an upward trend.

When someone talks about the bull market, they chiefly refer to the stock market. However, tradable entities such as currency, commodities, bonds, etc., are also treated as part of a Bull market.

The Bear Market downtrend occurs when the price moves lower low. While the price may move partially higher but not break higher high, downtrends are characterized by lower peaks and troughs over time.

For Example:

 

Downtrend: Series of Lower Lows and Lower Highs

We can look at the chart, which depicts a downtrend. Two things influence the price movement. Prices make high, but the previous high has not yet been met and turn back to break lower low again and again with prices falling (when a high is the same as a previous high and when a low is the same as a previous low)

 

What Is A Bull Market?

In this kind of market, investor self-belief is very high, and for this reason, people believe that prices will go on a rise. In this kind of market, optimism prevails, and there are strong prospects that prices will keep rising and the market will show a good trend. Moreover, it is not that easy to predict the nature of trends in the market.

Speculation plays a superior role here as it is mainly based on positive sentiment, and there are no set rules when evaluated to other markets.

Several psychological games can also be played among people investing in the market, and manipulations can be more.

From the nature of the animal Bull, the name has been derived from a bull market. It is an upward trend, as the bull always takes the attacking position by pointing its horns up in the air.

However, when a bear faces an attacker, a bear puts its paws down, and there is a bear market used to indicate a downward trend in the share market.

Example: Bull Market series of higher highs and higher lows

You can notice this in the illustration above. Crude oil prices move in an upside rally while taking the first high as the initial trend. Further, it indicates the same direction, making multiple times higher and higher low, which depicts a bull market trend.

 

What Is the Indication of a Strong Economy?

There is always a very good demand for securities in a Bull market. Moreover, the supply is relatively weak, which means that many investors are eager to buy the equity shares while only a minimal number want to sell. The prices of shares are on an upward trend, and investors compete on the stock exchanges such as the National Stock Exchange.

Thus, understandable that the prices of shares see an upward trend, and investors compete in the stock exchanges like the National Stock Exchange.

A bull market is typically linked with a strong economy as people have considerable money to invest.