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BULLS AND BEARS – THE MARKET EMOTIONS

In the stock market traders and investors often use these terms bulls and bears to represent the condition of the market. Let us see the meaning of these terms and the difference between them.

There are three kinds of market

  • Bull Market
  • Bear Market
  • Range Bound Market

Bull Market

  1. Bulls represent the buyers.
  2. If buyers are more, the price of the stocks rises.
  3. Increase in the price of stocks represents the bull market.
  4. In bull markets, investors are usually optimistic about the economy.
  5. A bull market is formed if the GDP of an economy is growing at a good pace.

What to do in a Bull Market

  • Buy and Hold – Buy the stock and hold it till the end of the bull market.
  • Buy on every High – Buy the stock and add them in a fixed quantity on every high the stock makes.
  • Buy on Pullbacks – The Bull market doesn’t mean the stock price rises continuously. But it raises with pullbacks (retracement). Buy on these pullbacks.

Bear Market

bulls and bears
  1. Bears represent the sellers.
  2. A bear market occurs if the world economy is slowing down.
  3. In the bear market, the sellers dominate the buyers. In fact, during a full bear market, there will be almost no buyers. Everyone will be selling. Example – During the economic crash
  4. Investors will have negative sentiment over the market and fear conquers their mind.
  5. If investors are selling security then it is said that the investors are taking SHORT positions on that security.
  6. Traders make a lot of money during stock market crashes by shorting.

Don’t get confused about the bear market with correction. Usually, market correction provides a chance for investors to add stocks to their portfolio and stay on the ride.
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