In stock market terminology, a market trend is putative tendency of a financial market to move in a particular direction over time. The terms most heard of regarding market trends are bear market and bull market, which describe downward and upward trends, respectively. The exact origin of the phrases are shrouded in obscurity, though their stock market connotation have been dated all the way back to 1714.
Bull Market: Bull market defines the upward movement of stocks and is associated with increasing investor confidence and increased investment in anticipation of future price increase. This trend generally begins prior to the general economy showing clear signs of recovery. There are two good ways to remember this: the ‘Running of the Bulls’ in Spain (surging stocks), and the idiom “take the bull by the horns” (investor confidence).
Bear Market: Bear market sums up the general decline in the stock market over a period of time and happens because of the transition from high investor optimism to widespread investor fear and pessimism. Quoting The Vanguard Group," "While there’s no agreed-upon definition of a bear market, one generally accepted measure is a price decline of 20% or more over at least a two-month period." A good way to remember this, at least for me, is that bears go into hibernation, and in stock market terms, so too does investor confidence.
Similarities and Differences
Similarities: Both trends take their name from the animal kingdom and are supposed to be related with their fighting styles and speed. A bull swipes its horns 'upwards' and a bear swipes its claws 'downwards'. A bull generally charges forward at great speed and a bear is slow and sluggish.
Differences: The bull market stands for the upward movement of stock market while the bear market stands for downward movement. Buying values are higher on the up days in a bull market while its up on the down days in a bear market. Also, there is a high volatility ratio in a bear trend than a bull trends. A bear market doesn't have a clear leader while a bull market has a leading stock.
Stock Market Tips and Tricks
Following are a few stock market tips and tricks you can apply during Bear and Bull trends:
During a Bull Market buy into fundamentally strong companies. Look for the following characteristics in companies:
- Earnings growth faster than the average.
- Conducting business in a strong sector.
- Operating in a growing economy.
- Company's stock approaching a technical buy signal on its bar chart and is performing better than the average stock with high relative strength.
Here is some stock advice to survive a Bear Market:
- Buy high-quality stocks when they dip in companies which pay dividends.
- Don't panic. A bear market happens as stocks go up and down.
- Don't sell indiscriminately. hold on to the high-quality stocks which will move up again later.
- Seek professional help, stock advice and online stock market tools to help you reexamine your portfolio as well as review your investment goals, your time horizon, risk tolerance, and financial circumstances.