Bull Market vs Bear Market

In stock market related articles and news, we often hear the phrases like bull market and bear market. Many people interested in stock investing must be wondering what these phrases exactly mean. For becoming successful in stock trading, being aware of what the bull market is in comparison to the bear market and all technical things related to the markets is quite essential. The content given in the next few paragraphs will help in knowing the comparison between bull market and bear market clearly.

Bear Market vs Bull Market: Comparison

What is a Bull Market?
In this comparison, first of all let us know what a bull market is. A bull market trend means that the sentiment in the stock market is very positive. This is actually due to a variety of reasons. Strong and consistent economic growth data is a must for a bull market. The bull market is a period when we see consistent and steady rise in the prices of stocks of listed companies. There is no opposition to the movement of the entire market and there are more buyers than sellers. There is a significant presence of both-retail as well as institutional investors in the stock markets in a bull market. A lot of delivery based buying is seen in a bull market which propels it in an upward direction.

Investors buy stocks by deciding their price targets and these targets are set by taking into consideration the valuations of the company. The earnings on a quarterly and yearly basis, cash flows, cash balance are the factors primarily considered while stock investing. In the bull run phase, the companies post great profits due to consistent growth in all sectors of the economy. High investor confidence is also a characteristic feature of a bull market. There is no fear in the minds of investors about the prices crashing down. Rising direct foreign investments in equity markets is also a point to be remembered in the comparison.

What to Do in a Bull Market?
Here are the suggestions for what to do in a bull market:

• Go long in fundamentally strong counters
• Create a diversified portfolio to avoid risks
• Avoid short selling
• Book profits when the valuations peak out
• Have accurate stop losses to protect profits
• Keep sufficient money in cash at bank

What is a Bear Market?
Now, in this comparison, let us know of the various bear market signs. Bear market is characterized by low earnings, poor financial results, stagnant economic growth and lack of confidence in stock investing and stock trading in people. A lot of short positions are seen being created in the market. These shorts may be cut for a few occasions, but ultimately, due to lack of buying by big players, the stock markets continue to slide down. Poor performance of foreign stock markets is also a reason for a bear market. In a bear market, you may see stocks of even fundamentally sound companies coming down. The expensive stocks are expected to come down first in such a market. Till date, there have been many bear market phases and it has been observe that after every bear market phase, there is a renewed buying interest. Economic recession can definitely lead to a bear market.

What to Do in a Bear Market?
Here are the suggestions for what to do in a bear market:

• Go short in weak stocks
• Book profits in stocks which have had a strong run up
• Do not make new investments till the downfall stops
• If possible, stay away from the markets till the overall situation improves

This comparison must have helped you to improve your stock trading abilities and you know how to play the stock market. So, hoping that you will implement these suggestions successfully, I would like to sign off here assuming that now you have a better idea about the difference between bull market and bear market. All the best!

DISCLAIMER: This article is just for reference purposes and does not recommend any stock market transactions.