Bull Market vs. Bear Market? What You Need to Know

The stock market can seem like a game of chance sometimes — you might wake up one day to find that your investments have grown by 5% overnight, then six months down the line, there was an unexpected crash, and you’ve lost all your gains (and then some)

What Is a Bull Market?

If I had to sum up the sentiment of a bull market in five words, it would be these: let the good times roll. During a bull market, everything looks peachy — the economy is doing great, stock prices are high, and unemployment is low. What more could you ask for?

Types of Bull Markets

When you hear bull markets discussed, chances are that it’s referring to stock market indices (namely the S&P 500, NASDAQ, or Dow Jones Industrial Average).

Bull markets can occur in markets for all kinds of investments. Here are the main types:

Stock bull markets. The three major stock market indices outlined above tend to move in line with each other and usually boom when the economy is doing well. -Gold bull markets. Physical gold, ETFs, and gold stocks often do well when the stock market is struggling.

What Is a Bear Market?

As they say, what goes up must come down — and that downward movement is encapsulated in bear markets. The mechanisms here are very similar to those found in a bull market, except for everything happens in reverse: prices decline, so more investors sell, resulting in prices to continually decline.

Understanding Bull Markets and Bear Markets

Bull markets and bear markets shouldn’t be looked at in isolation — they both form part of the economic cycle.  During the economy’s expansion, the bull market is in full swing; then, after it reaches its peak, it creeps into a bear market.

How Should You React to Bull Markets and Bear Markets?

No matter how well you know the theory, it’s useless if you can’t apply it to improving your investment decisions and becoming a more profitable trader. One thing you should have picked up on by now is that you can’t have a bull market without a bear market, and vice versa

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