What Is Bearish And Bullish Market ? – Learn With FxLifeStyle
MARKET TRENDS :
A market trend is a tendency of a financial market to move in a particular direction overtime. Traders identify market trends using the Technical Analysis and provides a framework which characterizes market trends as a predictable price response of the market at levels of price support and price resistance,varying over time. These trends are classified as :
(a) Secular trends for long time frames
(b) Primary trends for medium time frames
(c) Secondary trends lasting short times
WHAT IS A BULL AND A BEAR MARKET?
In stock trading and investing there are bulls and bears. It sounds dangerous but it is. not you often hear of the market being bullish or bearish. So what is a bull market and what is a bear market?
BULL MARKET :-
A bull market is one in which prices of a certain group of securities is rising or are expected to rise. It is a prolonged period where the investment prices rise faster than their historic average.
In such times, investors have a faith that the market will continue to rise in the long term. Bull markets can happen as a result of economic recovery, an economic boom, or investor psychology. A bullish trend in the stock market often begins before the general economy shows clear signs of recovery. It is a win win situation for the investors.
This is when the market showing is confidence.Number of shares traded is also high and even the number of companies entering the stock market show that the market is confident.
These are bullish characteristics. If there is a run of bullish days then you may hear the market is a bull market. Technically though a bull market is a rise in value of the market of at least 20%. The huge rise of the Dow and Nasdaq during the tech boom is a good example of a bull market.
BEAR MARKET :-
A bear market is a general decline in the stock market over a period of time.It is a transition from high investor optimism to widespread investor fear and pessimism.
A bear market is the opposite of a bull. If the markets fall by more than 20% then we have entered a bear market.Prices hover at the same price then go down,indices fall too and volumes are stagnant. In a bear market people are waiting at the bulls to start driving the prices up again.It is an opposite of bull market; it is characterized by falling prices and an expectation that they will continue falling.
When the market is bearish, it leads to a slow down of economy together with a rise in unemployment and inflation. In both the cases, people invest. Those who invest in a rising market and think that it will continue to be so are called bullish investors while those who trade in falling markets and think that it will continue to be so are known as bearish players.
How Market Trends Bears Or Bulls?
Though bull and bear market conditions are driven by the direction of stock prices, there are some other associated characteristics of these markets.
In a bull market there is a low supply of securities and a high demand for the same. This is because few are willing to sell due to the rising trend of the market, expecting it to grow further. As a result, share prices soar high, as investors compete to buy the available equity. In contrast a bear market has more sellers and lesser number of buyers.It is the tendency of the investor to buy when the market has a rising trend, hoping to get more profit out of it. This leads to high prices and continuation of the trend.
When the market has falling prices,it shakes the investor’s confidence and he begins to move his money out of equities and starts selling out. This leads to further falling of prices. As for the economy, stock market and the economies are strongly connected.A bear market is associated with a weak economy as most businesses are unable to record huge profits, because consumers are not spending nearly enough-this decline in profits, of course, directly affects the way the market evaluates Stocks.
Whether the market may bearish or bullish,it is not essential that you are losing your money, if you are with any advisory firm, be assure that it will provide you the best Stock Tips.
By Nikki roy