Bull Market Vs. Bear Market Conditions

 

The general market conditions in a security market can be classified as a bull market and a bear market. Bull and bear markets are the terms used to describe how stocks are doing in general, that is, whether they are appreciating or depreciating in value. At the same time, because the market is determined by investors' attitudes, these terms also denote how investors feel about the market and ensuing trends. They are described below:

Bull Market

A market condition is said to be a bull market when securities prices are rising. It refers to the market that is on the rise. The bull market condition implies that investors are confident in the market. The market confidence is reflected in terms of increasing prices and rising market indices. In a bull market, the number of shares traded is also high and even the number of companies entering the stock market shows that the market is confident. Besides, the bull market condition also represents that investors are optimistic about investment, the economy is in recovery and the government is taking actions to stimulate the economy and the market. These are called bullish characteristics. If there is a run of bullish days then we may consider that the market is a bull market.

Bear Market

A bear market is the opposite of a bull market. If the market falls in terms of securities prices and market indices, we are said to be entered into a bear market. In other words, it is the market associated with falling prices and showing a lack of confidence. It represents that investors are pessimistic and the economy is slowing down. In a bear market, prices float at the same level and then go down, market indices fall and trading volumes are slow. In a bear market, investors are waiting for the bulls to start driving up the prices again.

Investors, by recognizing the different kinds of market conditions, can make profits on shock trading. The basic idea behind trading in the stock market is to buy low and sell high. Thus, to make profits, Investors buy stocks in a bear market when prices are low and sell stocks in a bull market when prices are high. However, knowing when is the best time to buy and sell is not that simple. In other words, market conditions are difficult to predict and usually can be identified only after they exist.