Bull vs Bear Markets: What Does it All Mean?

This means, if they believe the market is trending in a bullish direction then they can open a long position. If they think the opposite, and they believe the market is bearish, then they can open a short position. This gives traders the opportunity to make profits in both bullish and bearish markets. Ideally, as investors see what appears to be the start of a bull market, they might buy stocks, stock mutual funds, and ETFs.

Bear markets can be scary, but they don’t tend to last very long — though that’s admittedly cold comfort for investors going through one. Not only that, but the average total return from a bull market period is 472%. Bull markets are often categorized as secular (indicating a period of growth lasting more than five years) or cyclical (indicating a shorter-term period of growth). In a bull market, every downturn looks like a buying opportunity, as the saying goes. Once they no longer have an active income stream, many people shift their investing strategies to preservation instead of growth. That generally means making your investments more conservative, or cash-, bond- and fixed-income-based, than you have before.

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Investments in T-bills involve a variety of risks, including credit risk, interest rate risk, and liquidity risk. As a general rule, the price of a T-bills moves inversely to changes in interest rates. Although T-bills are considered safer than many other financial instruments, you could lose all or a part of your investment. Market changes, such as in bull and bear markets, can be distressing but can serve as unique opportunities if you have a plan.

This results in a downward trend that investors believe will continue; this belief, in turn, perpetuates the downward spiral. During a bear market, the economy slows down and unemployment rises as companies begin laying off workers. A bull market is an economic upturn characterised by increasing employment, strong economies, and increasing GDP (gross domestic product). This is the opposite of a bear market which has fewer job opportunities, lower salaries, and decreased corporate gains due to increased competition. The beginning of a bull market may be difficult to spot but typically, bull markets follow periods of slowdowns or recessions where prices have become very low.

Characteristics of Bull and Bear Markets

Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns. AxiTrader Limited is a member of The Financial Commission, an international organization engaged in the resolution of disputes within the financial services industry in the Forex market. His team is also behind the Axi VIP portal, dedicated to continuing Bull and Bear Market: Definition & Difference to guide and educate traders. Desmond Leong runs an award-winning research team (2019, 2020, 2021 Finalists for Best FX Research and Best Equity Research) advising the largest banks and brokers on where the markets are heading. He specializes in technical analysis with a focus on Fibonacci, chaos theory, correlations, market structure, and Elliott Wave.

The SEC defines a bear market as a time when stock prices are declining, at least 20% over a two-month period, and market sentiment is generally not very optimistic. Bear markets typically result from an economic downturn fueled by geopolitical risks or market bubbles bursting. During bear markets, many investors try to cut their losses by selling their investments, which contributes to already plummeting prices. In a bullish market, where the outlook is positive, crypto users generally benefit the most when they can recognise the trend early on and buy currencies they are interested in early.

Key Differences Between Bull and Bear Market

Say the price of a stock in your portfolio slumps 25%, from $100 a share to $75 a share. If you have money to invest — and want to buy more of this stock — it can be tempting to try to buy when you think the stock’s price has cratered. An ETF is a fund you can generally buy through https://www.bigshotrading.info/blog/moving-average-what-do-you-need-to-know/ a broker in the same way you’d acquire a stock. The difference is that ETFs hold many different assets that can provide more diversified exposure to parts of the market. Similarly, Ethereum started the year at its lowest, around US$8 and accelerated upwards at the end of March.

The term bear had been in use prior to the breaking of the South Sea Bubble; however, the affair brought bear into widespread use. It can be scary to see stock prices fall 20% or more from a recent high — but the one thing investors shouldn’t do is panic. There’s no doubt that bear markets can be scary, but the stock market has proven it will bounce back eventually. The value of crypto assets can increase or decrease, and you could lose all or a substantial amount of your purchase price.

Bull vs. bear crypto market: What’s the difference and how to handle both

The most obvious characteristic of a bear market is a sustained period of declining prices. Lows get lower, indicating a strong selling pressure as anxiety overtakes greed as the driver of the market. One of the best ways to determine whether a bear market is pending is to watch interest rates.

And as you consider the different tools you use for trading, it may also be useful to analyse what’s stopping you from using the right tools for your forex trading. This technique minimizes the effects of market volatility, allowing participants to remain calm and rational, buying over time in set increments, instead of being led by market undulations. Consequently, it insulates buyers from the impact of drastic swings in the market.