A Bull market occurs when the economy is flourishing and the stock market is increasing in value. While a bear market happens when the economy or market shrinks. This is common knowledge among traders and investors, But, lets take a closer and detailed look at this market-types and what exactly induce bull and bear market runs
Formal definitions describes a bull market as a situation where stock market index prices generally increase by at least 20% from the recent low. In a bull market, Optimism and market confidence is always high, Demand outweighs supply, Prices are rising and trending higher. A bull market typically indicates a strong economy and low unemployment rates, which will result in massive growth. Investors who believe prices will increase overtime are called "Bulls".
Stock prices can go up, on average bullish days to about 112% and the average bull market lasts about 2.7 years.
History shows that bull market's don't last forever. At some point there will be a decline in investor confidence and this will lead to unusual dips, major corrections on longer time frames especially. This downward movements usually begins the start of a Bear market.
A bear market describes an extended fall in investment prices, this happens when any stock index or individual stock price drops or declines by at least 20% or even more from a recent high. A bear market is very different from a "Market Correction". a market correction is most usually a 5-10% price fall and it most often results in a continuation on the predominant trend.
A bearish market is caused by investor pessimism, Slowing economy, unemployment increase, interest rates, inflation and other factors that will cause falling prices of securities and investors choosing to sell their investments, get access to cash and move their holdings to more conservative assets. Bearish market situations cause selling of investments for less than what they were bought and the result is the stock or assets price falls even lower. investors that believe prices will continue falling are called "Bears".
The end of a bear market always presents a good opportunity for investors all the time. even if it's difficult to fully know or predict when the bear bottom prices have been reached or when the the trend change has been solidified. But paying attention to price patterns and corrections on charts and other fundamental economic signs can indicate when bearish market are reaching their end.
The average length of a bear market is 10 months. some bear market durations can be shorter too, depending on the market or asset class.
Bull markets really do not cause investors any stress or anxiety since market price are increasing or gaining value a lot of the time, aside the temporary dips and corrections that occur. But it's bear market that cause uncertainty and fear of loosing your investments. here are some ways you can invest in a bear market:
Both bull and bear markets are different sides of the same coin. and are natural parts of the economic cycle. How you invest in bullish or bearish market situations depends on your time horizon and investing strategy. Regardless of the the current market state, it's vital to stay focused on your long-term plans and prospects of the stocks or assets you're invested in.