Bear Market VS Bull Market (What You Really Need to Know)

Bull and Bear Markets play a strong role in extending or ending business cycles. Millions of words have been written about bull and bear markets, but here’s what you really need to know:

in a BULL Market, the majority of investors feel very positive about the current business cycle, the stock market, and the overall condition of u.s. and/or global business. More investors leave the spectator position, get into the game and buy stocks. More investors mean more money in the market. More money in the market usually translates to more buying activity and higher stock prices. This is a perfect example of supply and demand in action.

BEAR Market indicate that investor confidence is down, and the community perceives that the current business cycle is at or in a downturn. Many investors tend to retreat to spectator positions and sell their asets. They are fearful about the prospects for investing and as money leaves the market, stock prices tend to drop.

The reason why these two market extremes are called “bull and bear” is not clear. some say that a bull wants to “buck up” prices while the bear wants to “claw down” prices, or that a bull market charges ahead while a bear market is going into hibernation.

In any case, the bull and bear are iconic symbols on Wall street, continually fighting for control over the market’s overall direction. as an investor, you need to know who is winning the battle and invest appropriately. once you understand the trend — bull or bear — treat the trend as your friend.

If we are in a bull market and the trend is up, then it is a perfect time to buy low and sell high. in a bear market, the trend is also your friend, and there are ways to make money when stock prices are declining.

TIPS

1# “The trend is your friend” and “Buy low and sell high” are classic pearls of wisdom.

2# In a bear market, there’s a counterintuitive saying, “Sell high and buy low.” This is called selling short.

3# Another adage is to “Buy high and sell higher” This is about identifying stocks with strong momentum that are breaking out of a narrow trading range.

[Investing 101 - Wall Street Survivor # Page 33–34]